A developing economy is considering restricting the amount of money its citizens can invest abroad. What might the purpose of this restriction be?
A) to increase the dependency of the economy on developed economics
B) to increase capital formation by forcing its citizens to invest in their own country
C) to reduce the nation's trade deficit so that interest rates will be reduced and capital formation will increase
D) to increase the degree of equality in the income distribution

Question

Quizplus · Accepted Answer

The primary purpose of restricting the amount of money citizens can invest abroad is to keep capital within the country, encouraging investment in domestic businesses and infrastructure, which can lead to increased capital formation. This policy aims to strengthen the local economy by ensuring that the funds are used to finance domestic projects rather than being invested overseas.

A Developing Economy Is Considering Restricting the Amount of Money