If Argentina suffers from capital flight, Argentinean domestic investment will fall and Argentinean net exports will increase.

Question

Quizplus · Accepted Answer

Capital flight refers to the movement of large amounts of money out of a country due to economic, political or social instability, or simply to seek better investment opportunities elsewhere. If Argentina suffers from capital flight, it means that investors and individuals are moving their money out of the country, which can result in a decrease in domestic investment. As a result, there will be less money available for local businesses to invest in their operations, leading to a decline in production capacity and economic growth.

On the other hand, net exports may increase because a weaker currency makes the exports from Argentina cheaper for foreign buyers, increasing demand for them. As a result, the trade balance may improve due to an increase in exports and a decrease in imports. However, the overall impact of capital flight on the Argentinean economy can be negative as it can lead to macroeconomic imbalances, inflation, and high interest rates.

If Argentina Suffers from Capital Flight, Argentinean Domestic Investment Will