52. What is capital flight? When a country experiences capital flight, what is t

Question

52. What is capital flight? When a country experiences capital flight, what is the effect on its interest rate and the value of the currency? 53. Ifa car in Japan costs 500 000 yen, a similar car in Canada costs $10 000, and a dollar can buy 100 yen, what are the nominal and real exchange rates? 54. Describe the economic logic behind the theory of purchasing-power parity If the Bank of Canada started printing large quantities of Canadian dollars, what would happen to the number of Japanese yen a dollar could buy? 55. 56. Describe the economic logic behind the theory of interest rate parity.

Explanation / Answer

Answer.)

Q52.) Capital flight is a large and sudden movement of funds out of a country. Capital flight causes the interest rate to increase and the exchange rate to depreciate. The increased demand for loanable funds causes the equilibrium real interest rate to rise.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.