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- Subject
- Macroeconomic Issues and Analysiseconomics-mcqs › macroeconomic-issues-and-analysis
- Published
- 31 May 2019
- Last updated
- 28 May 2026
When there are no international capital restrictions, what do central banks adjust to create appropriate incentives for speculators?
Multiple choice question for Macroeconomic Issues and Analysis. Select an option, then review the explanation below.
Explanation
Central banks influence speculative behavior primarily by setting interest rates, especially when international capital flows are unrestricted. Adjusting interest rates offers the right incentives for speculators, unlike targeting money supply, income policies, or inflation goals.
More Macroeconomic Issues and Analysis MCQs
Practice related questions from the same subject.
- 1.Which of the following is NOT considered an advantage of the single market?
- 2.Within the European Exchange Rate Mechanism (ERM), each member country maintained a fixed exchange rate, and together the group ________ in relation to other countries worldwide?
- 3.In a country with a floating exchange rate system, what is the likely effect on its currency if its inflation rate exceeds that of its trading partners?
- 4.In a floating exchange rate system, how do expectations of rising interest rates typically affect the currency's exchange rate?
- 5.How does a fixed exchange rate combined with full capital mobility affect the effectiveness of monetary policy?