Capital flight reduces a country's real exchange rate.

Name: Capital flight reduces a country's real exchange rate.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When capital flees a country, the demand for the country's currency decreases, leading to a decrease in the currency's value in relation to other currencies, resulting in a reduction in the country's real exchange rate. This can lead to higher inflation, increased borrowing costs, and reduced economic growth.

Capital Flight Reduces a Country's Real Exchange Rate