Capital flight ?
Correct answer: C. increases a country's net exports and decreases its long-run growth path
- A. decreases a country's net exports and increases its long-run growth path
- B. increases a country's net exports and increases its long-run growth path
- C. increases a country's net exports and decreases its long-run growth path
- D. decreases a country's net exports and decreases its long-run growth path
Explanation
Capital flight sends domestic funds abroad, increasing net capital outflow and the supply of domestic currency in foreign-exchange markets. The resulting depreciation raises net exports, but reduced domestic investment lowers the economy’s long-run growth path.
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