14. Why is "capital flight" harmful to an economy?
A. It increases local consumption
B. It strengthens the local currency
C. It decreases domestic investment and weakens the economy
D. It encourages imports
Answer (1)
The answer is letter C. It decreases domestic investment and weakens the economyCapital flight happens when investors quickly pull their money out of a country due to fear, instability, or corruption. This reduces money available for business, jobs, and public services. It also weakens the country’s currency and investor trust.For example, during the last years of the Marcos dictatorship, many Filipino elites and foreign investors withdrew money from the country due to fears of collapse. This worsened the economic crisis and made recovery difficult.
