The returns from the home country and foreign country capital markets are equalized if:
A) the home country interest rates are higher.
B) the foreign country interest rates are higher.
C) the foreign country has a higher price level.
D) both countries have no capital controls.

Question

Quizplus · Accepted Answer

Capital mobility without restrictions, such as capital controls, allows for the equalization of returns between home and foreign country capital markets as investors freely move capital to where returns are highest, eventually equalizing the rates due to supply and demand dynamics.

The Returns from the Home Country and Foreign Country Capital