The phenomenon of _____ occurs when residents and nonresidents of a country rush to convert their holdings of domestic currency into a foreign currency.

Question

Quizplus · Accepted Answer

The correct term for the given scenario is "capital flight," which refers to the sudden outflow of capital (i.e., money) from a country due to fear of economic instability or uncertainty. This can lead to a rapid depreciation of the domestic currency and a rush to convert it into a stable foreign currency. Deflation refers to a general decrease in prices, while arbitrage is the practice of exploiting price differences in different markets. A liquidity rush may occur when there is a sudden demand for cash, and a currency swap involves exchanging one currency for another.

The Phenomenon of _____ Occurs When Residents and Nonresidents of a Country