Capital ﬂight from the DVCs may be caused by
A) a fear of government privatization efforts.
B) slow domestic inﬂation.
C) low rates of domestic taxation.
D) risks of severe ﬂuctuations in exchange rates.

Question

Quizplus · Accepted Answer

The risks of severe fluctuations in exchange rates can cause investors to withdraw their capital from DVCs and invest in more stable economies. This is because exchange rate fluctuations can lead to significant losses for investors, making them more likely to seek out more stable investment opportunities in other countries. A fear of government privatization efforts, slow domestic inflation, and low rates of domestic taxation may also affect capital flight, but they are not as significant or directly related to exchange rate fluctuations as D.

Capital ﬂIght from the DVCs May Be Caused by