When Mexico suffered from capital flight in 1994,which of the following best describes the effects of this event on the Canadian economy?
A)Canadian demand for loanable funds and Canadian net capital outflow rose.
B)Canadian demand for loanable funds and Canadian net capital outflow fell.
C)Canadian demand for loanable funds fell, and Canadian net capital outflow rose.
D)Canadian demand for loanable funds rose, and Canadian net capital outflow fell.

Question

Quizplus · Accepted Answer

When Mexico suffered from capital flight in 1994, investors withdrew their funds from Mexico and sought safer locations for investment. As a result, the demand for loanable funds in Canada fell because investors were less willing to invest. Canadian net capital outflow also fell because capital was not flowing out of Canada; rather, investors were withdrawing their funds from other countries and bringing them back to Canada.

When Mexico Suffered from Capital Flight in 1994,which of the Following