A ng.cengage.com Mind Tap – Cengage Learning Content – Principles of Law (HEB02a) Get Hamework Halp With Chegg Study Chagg.com SCANO192.JPG 2,544×3,488 pixels * CENGAGE MINDTAP Q Search this course Alice v macroeconomic theory of the open economy Aplia Questions: 5. Capital Flight Aa Aa E A-Z Assume that Belarus experiences a sudden bout of political turmoil, which causes world financial markets to become uneasy. Because people now view Belarus as unstable, they decide to pull some of their assets out of Belarus and into more stable economies. This unexpected shock to the demand for assets in Belarus is known as capital filght. The following problem will help you understand the implications of such an event. The curve on the following graph shows the relationship between the real interest rate and the level of net capital outflow (NCO), measured in terms of the Belarusian currency, the ruble. Draw the new net capital outflow curve by using the purple line (diamond symbols) to connect two of the black Xs. Assuming that the capital flight causes the equilibrium real interest rate in Belarus to rise from 5% to 6%, use the red point (cross symbcl) to show the real interest rate and level of net capital outflow before the capital flight, and use the blue point (circle symbol) to show the outcome after the capital flight. REAL INTEREST RATE (Per cant) 10 New NCO Curve Befure Flight After Flight -2 Help Usar All NET CAPITAL OUTFLOW IDillions of rubles A ng.cengage.com Mind Tap – Cengage Learning Content – Principles of Law (HEBO22] SCANO192.JPG 2,544×3,488 pixels Get Hamework Halp With Chegg Study Chagg.com CENGAGE MINDTAP Q Search this course Alice v Aplia Questions: A macroeconomic theory of the open economy The following graph represents the loanable funds market in Belarus. Show the effects of capital flight by shifting the demand curve, the supply curve, ar both. A-Z REAL INTEREST RATE Supply → D2 D1 OTY OF LOANABLE FUNDS Based on your results, fill in the following table summarize the effects of capital flight on Belarus. Effects of Capital Flight Increase s Real Interest Rate Decreases Real Exchange Rate Net Exports ONA 3 16 C 2004-2016 Aalla, Al dahts rosaved. Grephs Too 1.55 2002-20L Ceansoe esmine Draceer 1.24 Cenurchi 22-2013 Cengege L ghts reservec. C 2013 Cengage Laarning axcar as noted. All ights rasarved. 1. All nights Grade It Now Save & Continue

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