Why may a "black market" develop in nations in which government has imposed capital controls?
A) All foreign currency purchases and sales are conducted and controlled by the government, and it is illegal to trade privately.
B) Traders are trying to avoid the taxes they must pay on each transaction.
C) The government makes a huge profit on currency trades that the private sector wants access to.
D) None of these explains why a "black market" may develop in these nations.

Question

Quizplus · Accepted Answer

When the government imposes capital controls, it restricts access to foreign currency and may limit the amount that individuals and businesses can hold or transfer. As a result, a black market may develop where individuals or businesses can purchase and sell foreign currency outside the control of the government. This is often illegal and may be risky, but it provides access to currency that would otherwise be unavailable due to the government's restrictions.

Why May a "Black Market" Develop in Nations in Which