Answer: help a country exercise control over its external balance.

## Explanation Capital restrictions are government-imposed controls on the flow of capital across borders. These restrictions typically include: 1. **Limits on capital outflows** - restricting residents from moving capital abroad 2. **Limits on capital inflows** - restricting foreign investment into the country 3. **Exchange controls** - limiting the ability to convert domestic currency to foreign currency **Why option B is correct:** Capital restrictions help a country exercise control over its external balance by: - Preventing capital flight during economic crises - Maintaining exchange rate stability - Controlling balance of payments deficits - Preserving foreign exchange reserves - Managing current account imbalances **Why option A is incorrect:** Capital restrictions typically **prevent** capital from earning the highest return by limiting its ability to flow to markets with higher returns. Free capital mobility allows capital to seek the highest risk-adjusted returns globally. **Why option C is incorrect:** While capital restrictions might provide short-term stability, they generally **hinder** long-term economic growth by: - Reducing access to foreign investment - Limiting technology transfer - Decreasing competition and efficiency - Increasing borrowing costs - Creating market distortions Empirical evidence shows that countries with fewer capital restrictions tend to experience higher long-term growth rates due to better resource allocation and increased investment opportunities.

Author: LeetQuiz .