When a country experiences capital flight its currency
A)appreciates and net exports rise.
B)appreciates and net exports fall.
C)depreciates and net exports rise.
D)depreciates and net exports fall.

Question

Quizplus · Accepted Answer

Capital flight leads to a depreciation of the country's currency as investors sell off assets and convert the currency into foreign currencies. This depreciation makes the country's goods cheaper for foreign buyers, thus increasing net exports.

When a Country Experiences Capital Flight Its Currency