Which of the following is consistent with capital flight from Mexico?
A)The Mexican capital outflow decreases.
B)The real exchange rate of the peso depreciates.
C)The Mexican real interest rate decreases.
D)The Mexican demand for loanable funds increases.

Question

Quizplus · Accepted Answer

Capital flight from Mexico would lead to a decrease in demand for pesos, which would cause the real exchange rate to depreciate. Options A, C, and D suggest an increase in capital inflow or a decrease in capital outflow, which is opposite to the concept of capital flight.

Which of the Following Is Consistent with Capital Flight from Mexico