If a country chooses to restrict international capital flows and to maintain a fixed exchange rate, then it must:
A) live with exchange-rate volatility.
B) control its citizens' access to world financial markets.
C) give up the use of monetary policy for purposes of domestic stabilization.
D) give up the use of fiscal policy for purposes of domestic stabilization.

Question

Quizplus · Accepted Answer

To maintain a fixed exchange rate while restricting international capital flows, a country must control its citizens' access to world financial markets to prevent capital movements that could destabilize the fixed exchange rate.

If a Country Chooses to Restrict International Capital Flows and to Maintain