Capital tends to flow towards countries with lower political risk as it provides a stable investment environment and reduces the uncertainty of returns. Countries that have high political risk, such as war or political instability, tend to have higher risk premiums, which can deter foreign investors.

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Capital Tends To

Question 90

Multiple Choice

Capital tends to:

A) flow towards countries with high political risk.
B) flow towards countries with low political risk.
C) ignore political risk and focus on returns.
D) ignore political risk in the current time frame.

Correct Answer: