Suppose a Country Is Pursuing a Fixed Exchange Rate Regime

Multiple Choice

Suppose a country is pursuing a fixed exchange rate regime with imperfect capital mobility. The ability of that country to move its domestic interest rate while maintaining its exchange rate will depend on:

A) the degree of capital controls.
B) the degree of development of its financial markets.
C) the amount of foreign exchange it holds.
D) All of the above.
E) Both B and C.