#1
What is capital flight?
The rapid outflow of assets and money from a country
ExplanationLarge-scale money and asset exodus from a nation.
#2
Which of the following is NOT a cause of capital flight?
Stable financial markets
ExplanationStable markets do not typically induce capital flight.
#3
Which of the following is NOT a factor contributing to capital flight?
Sound fiscal policies
ExplanationSound fiscal policies usually discourage capital flight.
#4
What are the main consequences of capital flight?
Currency devaluation and economic instability
ExplanationResulting in currency devaluation and instability.
#5
Which of the following measures can governments use to control capital flight?
Imposing currency exchange restrictions
ExplanationGovernmental imposition of currency exchange limitations.
#6
Which of the following is a potential consequence of prolonged capital flight?
Stagnant economic growth
ExplanationPersistent capital flight can lead to economic stagnation.
#7
What distinguishes capital flight from normal capital outflows?
Capital flight involves sudden, large-scale movements of capital
ExplanationIt's characterized by abrupt, massive capital movements.
#8
In which sector does capital flight pose the greatest risk?
Banking and finance
ExplanationHighest risk is posed to the banking and finance sector.
#9
Which of the following statements best describes the impact of capital flight on exchange rates?
Capital flight leads to depreciation of the domestic currency
ExplanationIt results in the devaluation of the national currency.
#10
Which economic indicator can be affected by capital flight?
Gross Domestic Product (GDP)
ExplanationCapital flight can impact Gross Domestic Product.
#11
What role does international cooperation play in addressing capital flight?
It can help mitigate capital flight through information sharing and policy coordination
ExplanationGlobal collaboration aids in managing capital flight by sharing data and coordinating policies.
#12
What is the 'flight to safety' phenomenon associated with capital flight?
Investors fleeing to countries with stable political and economic conditions
ExplanationInvestors seek refuge in stable political and economic havens.
#13
What is the relationship between capital flight and sovereign debt?
Capital flight increases sovereign debt
ExplanationIt contributes to a rise in national debt levels.
#14
In what ways can capital flight impact a country's fiscal policy?
By reducing government revenues
ExplanationIt decreases government income streams.
#15
Which economic theory best explains the occurrence of capital flight?
Neoclassical economics
ExplanationCapital flight aligns with neoclassical economic principles.
#16
What is the 'fear of expropriation' motive for capital flight?
Fear of government seizing assets
ExplanationConcern over government asset seizure prompts capital flight.
#17
What role do exchange rate regimes play in influencing capital flight?
Flexible exchange rate regimes encourage capital flight
ExplanationFlexible exchange rates can stimulate capital flight.