perfect international capital mobility suggests that international funds will be responsive to ________ differentials?
Correct answer: B. interest rate
- A. current account
- B. interest rate
- C. tax
- D. price
Explanation
International investors move funds toward countries offering relatively higher returns, so cross-border capital flows respond strongly to interest-rate differentials. Perfect mobility makes even small differentials capable of causing large flows.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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