What two phenomena are related to financial repression in Latin America?
A) government spending, comparative advantage
B) budget surpluses, comparative disadvantage
C) capital flight, currency substitution
D) inflation, budget deficits
E) capital flight, declining terms of trade

Question

Quizplus · Accepted Answer

Capital flight and currency substitution are both related to financial repression in Latin America. Capital flight occurs when investors move their assets out of a country due to economic instability or unfavorable conditions, while currency substitution refers to the widespread use of foreign currencies (usually the US dollar) instead of the domestic currency as a store of value. Both of these phenomena are common in Latin America due to financial repression, which includes policies such as interest rate caps, currency controls, and restrictions on foreign investment that limit opportunities for domestic savers and investors.

What Two Phenomena Are Related to Financial Repression in Latin