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In an Economy with Perfect Capital Mobility,if Domestic Interest Rates

Question 13

Multiple Choice

In an economy with perfect capital mobility,if domestic interest rates are above world interest rates then


A) capital outflows will drive domestic interest rates down.
B) capital inflows will drive domestic interest rates down.
C) current account deficits will drive domestic interest rates down.
D) the central bank will have to intervene even if exchange rates are floating.

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