Question

Political instability can often lead to economic volatility, reduced growth, and capital flight. For example, in recent times this can be seen in Venezuela. Research the economic situation there (or in another country that has gone through turmoil) and discuss with the group what you learned about the impact of political instability on the economy. Can you offer us any examples of the consequences that instability has brought?

Answer 1

The recent example of political turmoil would be the riots in the Hong Kong.

Explanation:

The political unrest in Hong Kong has made the businesses difficult to run and produce. The violence has made the situation worse. The investor confidence went zero and some of the wealthy Hong Kong citizens are fleeing the country to another country. The economic growth of Hong Kong was reported to have declined significantly. The investments from abroad in Hong Kong has stopped and some people are taking their money out of the country (capital flight). This brings so much uncertainty in the business operations and lower the output significantly. This affect applies to every business in Hong Kong and the real GDP declined. Since many people , young and old are involved in the protests and not working, the firms are facing lower productivity. The unemployment is likely to soar and the inflation is likely to ensue at rapid pace.