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Basic Question 3 of 6
When dealing with unwanted capital inflows EM policymakers would sell domestic securities to control the size of the monetary base and therefore the quantity of money. According to IMF, this is appropriate when:
B. The inflation rate is low.
C. The economy is operating at full capacity.
A. The domestic currency is undervalued.
B. The inflation rate is low.
C. The economy is operating at full capacity.
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Learning Outcome Statements
describe objectives of central bank or government intervention and capital controls and describe the effectiveness of intervention and capital controls;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.