Question

4. According to the open economy macroeconomic model, which of the following statements is (are) correct?
(x) Capital flight requires the cooperation of the country’s airlines to move precious metals to safe areas.
(y) A large and sudden movement of funds out of a country is called capital flight
(z) Capital flight is frequently caused by an increase in political or economic instability.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

5. which of the following statements is (are) correct?
(x) When a country suffers from capital flight, the exchange rate depreciates because supply in the market for foreign-currency exchange shifts right.
(y) When a country experiences capital flight its net capital outflow increases and its real exchange rate falls.
(z) When a country experiences capital flight its real interest rate increases as the country’s demand for loanable funds shifts to the left.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (z) only

According to the open economy macroeconomic model, which of the following statements is (are) correct?
(x) The usual effects of capital flight include a rightward shift of demand in the loanable funds market and a rightward shift of the NCO curve,
(y) Capital flight typically causes a decrease in the domestic interest rate and an increase in NCO.
(z) Capital flight typically causes the real exchange rate of the domestic currency to depreciate because capital flight causes an increase in the supply of the currency in foreign currency exchange markets.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Answer 1

Question 4

Answer is D) y and z only

Because Capital flight requires the cooperation of the country’s airlines to move precious metals to safe areas. This statement is incorrect

whereas Y an Z statements are correct

Question 5

Capital flight tends to increase interest rates and cause the currency to depreciate.

When a country experiences capital flight, the interest rate rises because the demand for loanable funds shifts to right

When a country suffers from capital flight, the exchange rate depreciates because supply in the market for foreign-currency exchange shifts right.

When a country experiences capital flight its net capital outflow increases and its real exchange rate falls.

Hence answer is B) x and y only   and statement z is incorrect

Question 6

The usual effects of capital flight include a rightward shift of demand in the loanable funds market and a rightward shift of the NCO curve.

Capital flight typically causes the real exchange rate of the domestic currency to depreciate because capital flight causes an increase in the supply of the currency in foreign currency exchange markets.

Capital flight typically causes a increase in the domestic interest rate and an increase in NCO.

hence answer is C) x and z only . Statement y is incorrect