CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

Regarding capital controls, which statement is true?
A. Capital controls depend on the level of foreign exchange reserves.
B. The IMF now considers capital controls as a legitimate way to deal with the problem of unwanted capital inflows.
C. The IMF now considers capital controls as an effective way to deal with the problem of unwanted capital inflows.
Explanation: B is true. Capital controls may be needed to resist or deflect capital inflows. However, C is false as the effectiveness depends on how persistent those flows are.

A is false. The likeliness of success for FX intervention, not capital control, depends directly on the on the level of foreign exchange reserves.

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