If a country experiences capital flight,which curves shift right?
A)the demand for loanable funds and the demand for its currency in the market for foreign-currency exchange
B)the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange
C)the supply of loanable funds and the demand for its currency in the market for foreign-currency exchange
D)the supply of loanable funds and the supply of its currency in the market for foreign-currency exchange

Question

Quizplus · Accepted Answer

Capital flight refers to the movement of money from one country to another due to economic or political uncertainty. This leads to a decrease in the supply of the domestic currency in the market for foreign-currency exchange. As a result, the supply curve shifts to the left. Additionally, capital flight increases the demand for foreign currency, which leads to a shift in the demand curve for foreign currency to the right. Therefore, the correct answer is B, which is the shift in the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange.

If a Country Experiences Capital Flight,which Curves Shift Right