Hong Kong chooses to have ________ and ________ and therefore,cannot have an independent monetary policy at the same time.

Question

Quizplus · Accepted Answer

If Hong Kong wants to have free capital mobility, which means unrestricted movement of capital in and out of the country, it cannot have an independent monetary policy as well. This is because a fixed exchange rate is necessary to maintain the stability of the currency in the face of free capital mobility, which means that the exchange rate cannot be adjusted to respond to changes in the domestic economy. Therefore, the only option that is compatible with free capital mobility is a fixed exchange rate.

Hong Kong Chooses to Have ________ and ________ and Therefore,cannot

Hong Kong Chooses to Have and and Therefore,cannot