In theory, financially open economies can:
A) manipulate their trade accounts to avoid imbalances.
B) avoid all economic shocks or downturns.
C) lower the unemployment rate but cannot control inflation.
D) use access to the international financial markets to keep investment and consumption stable.

Question

Quizplus · Accepted Answer

In financially open economies, access to the international financial markets can help stabilize investment and consumption levels by facilitating capital inflows and outflows. However, manipulating trade accounts to avoid imbalances is not a sustainable solution and avoiding all economic shocks or downturns is impossible. While lowering the unemployment rate is possible, controlling inflation through monetary policy can also be challenging in financially open economies.

In Theory, Financially Open Economies Can