International capital mobility:

Question

Quizplus · Accepted Answer

International capital mobility contributes to the equalization of expected returns across countries because investors can move capital to countries with higher expected returns, which drives down the expected returns in those countries and drives up the expected returns in countries with lower expected returns. This equalization process helps to reduce the risk of investing in foreign countries and can lead to a more efficient allocation of capital. The other options (A, C, D) are not correct because international capital mobility can contribute to the flexibility of exchange rates, create arbitrage opportunities, and make interest rates different across countries due to differences in inflation rates and other factors.

International Capital Mobility