Post Utme Covenant University 2019 Economics Question 34

Practice objective / multiple choice question 34 from the 2019 Post Utme Covenant University Economics examination.

Post Utme Covenant University 2019 Economics Objective / Multiple Choice
Question 34 POST_UTME_COVENANT_UNIVERSITY • 2019 • ECONOMICS • objective

Consider a country with a fixed exchange rate regime. If the domestic interest rate increases by 2% and the foreign interest rate remains cons\tant, what will be the effect on the balance of payments?

Answer Options

A. The balance of payments will improve due to increased capital inflows.
Correct Answer B. The balance of payments will worsen due to increased capital outflows.
C. There will be no effect on the balance of payments.
D. The balance of payments will improve due to increased exports.
Correct Answer
B
Correct Option:
The balance of payments will worsen due to increased capital outflows.

About This Question

This is Post Utme Covenant University 2019 Economics Question 34. It is one of the objective questions from the 2019 Post Utme Covenant University Economics examination.

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