When a country experiences capital flight,the interest rate
A)falls because the demand for loanable funds shifts left.
B)falls because the supply for loanable funds shifts right.
C)rises because the demand for loanable funds shifts right.
D)rises because the supply for loanable funds shifts left.

Question

Quizplus · Accepted Answer

Capital flight means that investors are moving their capital out of the country, which decreases the supply of loanable funds in the country. As a result, the demand for loanable funds from those remaining in the country increases, causing interest rates to rise in order to entice lenders.

When a Country Experiences Capital Flight,the Interest Rate