If a country experiences capital flight, which of the following curves shift right?
A)Only the demand for loanable funds.
B)Only the supply of dollars in the market for foreign-currency exchange.
C)Only the net capital outflow curve and the supply of dollars in the market for foreign currency exchange.
D)The demand for loanable funds, the net capital outflow curve, and the supply of dollars in the market for foreign currency exchange.

Question

Quizplus · Accepted Answer

Capital flight is the movement of capital out of a country. This will increase the supply of dollars in the market for foreign currency exchange, as people sell their domestic currency to buy foreign currency. It will also increase the net capital outflow curve, as more capital is leaving the country. Finally, it will increase the demand for loanable funds, as people borrow money to invest abroad.

If a Country Experiences Capital Flight, Which of the Following