The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions.
Figure 32-6
-Refer to Figure 32-6.Which of the following is consistent with capital flight from Mexico?
A) The real exchange rate of the peso appreciates from E₀ to E₁.
B) The real exchange rate of the peso depreciates from E₀ to E₁.
C) The real exchange rate of the peso appreciates from E₁ to E₀.
D) The real exchange rate of the peso depreciates from E₁ to E₀.
Correct Answer:
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