If a country experiences capital flight, which of the following lists only curves that shift right?
A)the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange
B)the demand for loanable funds and the supply of dollars in the market for foreign-currrency exchange
C)the supply of loanable funds and the demand for dollars in the market for foreign-currency exchange
D)the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange

Question

Quizplus · Accepted Answer

Capital flight refers to the movement of investment capital out of a country due to political or economic instability. This leads to a decrease in the supply of loanable funds within the country, as investors withdraw their funds. As a result, the demand for loanable funds within the country decreases, shifting the demand curve for loanable funds to the left. Meanwhile, investors who are withdrawing their capital will also be selling the domestic currency and buying foreign currency, increasing the supply of dollars in the market for foreign-currency exchange and shifting the supply curve for dollars to the right. Therefore, the only curve that shifts right in this scenario is the supply of dollars in the market for foreign-currency exchange, thus option B is correct.

If a Country Experiences Capital Flight, Which of the Following