If domestic residents are restricted in their ability to purchase foreign assets then their government is imposing:
A) controls on capital inflows.
B) controls on capital outflows.
C) controls on both capital inflows and outflows.
D) fixed exchange rates.

Question

Quizplus · Accepted Answer

If domestic residents are restricted in their ability to purchase foreign assets, then their government is imposing controls on capital outflows. This means that individuals and companies in the country are not allowed to invest or transfer funds outside the country's borders. This restricts their ability to diversify their portfolios and limits their access to foreign investment opportunities. This type of capital control is often implemented by governments to maintain foreign reserves, prevent currency depreciation, or manage inflation.

If Domestic Residents Are Restricted in Their Ability to Purchase