Using the mundell-fleming model

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Reference no: EM13771028

Problems in the banking system eroded international confidence in Southeast Asian economies including those of Thailand, South Korea, and especially Indonesia which eventually leaded to the Southeast Asian crisis in 1997-98. Using the Mundell-Fleming model, which of the following statement is NOT correct?

A. Risk premiums and interest rates rose since investors lost confidence in banks.

B. Stock prices fell as foreign investors sold assets and pulled their capital out.

C. The capital outflows increased exchange rates as a result.

D. The value of collateral used for bank loans was reduced as a result.

Reference no: EM13771028

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