Which of the Following Is an Effect of Capital Flight

question 138

Multiple Choice

Which of the following is an effect of capital flight in a small economy such as Mexico?

• A)a shift of the supply of loanable funds to the left
• B)a decrease of the Mexican interest rate
• C)a shift of the net capital outflow to the right
• D)a depreciation of the Mexican real exchange rate

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Definitions:

Inflation

The pace at which average prices for products and services climb, reducing the value of money.

U.S. Exports

Products and services created in the United States and exported to foreign nations.

International Tourism

Traveling to foreign countries for leisure, business or other purposes, which contributes to the economic and cultural exchange between nations.

Foreign Capital Inflow

The entry of capital from one country into another, where it is used to purchase assets or invest in business activities, often enhancing economic development.