An increase in capital inflow could harm the economy by:

Question

Quizplus · Accepted Answer

An increase in capital inflow would lead to an increase in demand for the recipient country's currency, causing an appreciation of the currency. This would make the country's exports more expensive and less competitive in international markets, potentially harming the economy. It could also lead to a current account deficit if the increase in imports outpaces the increase in exports.

Therefore, option A is the correct choice.

An Increase in Capital Inflow Could Harm the Economy By