The greater the degree of international capital mobility:
A)the further to the right is the FE curve.
B)the further to the left is the FE curve.
C)the steeper is the FE curve.
D)the flatter is the FE curve.

Question

Quizplus · Accepted Answer

The greater the degree of international capital mobility, the more responsive capital flows are to differences in interest rates between countries, making the FE (Foreign Exchange Market Equilibrium) curve flatter. This is because with high capital mobility, even small differences in interest rates can lead to large flows of capital, which in turn affects exchange rates and brings the foreign exchange market into equilibrium with smaller changes in the domestic interest rate.

The Greater the Degree of International Capital Mobility