Describe the concept of capital flight and its potential consequences for a country's economy and financial stability. A) Capital flight refers to the movement of goods and services across international borders, which has no impact on an economy. B) Capital flight involves the rapid outflow of investment and financial assets from a country, potentially leading to a currency crisis, economic instability, and a weakening of the country's financial system. C) Capital flight is a government policy to attract foreign investments. D) Capital flight has no relevance to a country's economy or financial stability.

Question: Explain the concept of capital flight and its potential consequences for a country's economy and financial stability. A) Capital flight refers to the movement of goods and services across international borders, which has no impact on an economy. B) Capital flight involves the rapid outflow of investment and financial assets from a country, potentially leading to a currency crisis, economic instability, and a weakening of the country's financial system. C) Capital flight is a government policy to attract foreign investments. D) Capital flight has no relevance to a country's economy or financial stability.

In algebraic terms, contrast the national savings and investment identities noted below: I) Private savings + Trade deficit + Government surplus = Private investmentII) Private savings = Private investment + Government budget deficit + Trade surplus.

2) On the graph below show how the Solow model will differ if we allow for trade. Assume that the country has a current account deficit. Hint: Remember that national savings is equal to sY+ = It + CA₁₁ where CA, is the nation's current account at time t. Therefore, the (per worker) capital accumulation function will become k++1 - k₁ = syt - cat - (n+ d) k₁, where ca, is the "current account per worker."

In a developing economy that primarily relies on agriculture, the government decides to implement a series of reforms aimed at liberalizing the financial sector, including easing restrictions on foreign bank entry. What is the most likely short-term impact of these reforms on the agricultural sector's access to credit?  A) Increased access to credit for the agricultural sector due to enhanced competition in the banking sector.  B) Decreased access to credit for the agricultural sector as foreign banks focus on more profitable urban and industrial clients.  C) No significant change in access to credit for the agricultural sector, as foreign banks have minimal impact on local lending.  D) A shift in credit allocation from large agricultural businesses to small-scale farmers due to diversified lending practices of foreign banks.