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Q. Explain the phenomenon of capital flight.
Answer:
The reserve defeat accompanying a devaluation scare is habitually labeled capital flight for the reason that the associated debt in the balance of payments accounts is a private capital outflow. Capital flight may perhaps force the central bank to devalue sooner and by a larger amount than planned for the reason that the central bank's reserves are low to begin with.
Q. What are the three main reasons why governments sometimes chose to devalue their currencies? Answer: 1. Permit the government to fight domestic unemployment despite the
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Q. Explain how an increase in government spending would affect the DD-AA schedule in the short run. Answer: A raise in government spending will raise aggregate demand, which wi
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