capital flight

• What happens to large amounts of money in the country?

  They are taken out of the country
• Why is it beneficial for money to be placed in banks within the country?

  It allows banks to create credit for spending
• What are some reasons for taking money out of the country?

  Lack of confidence, hiding from authorities, profit
• What significant event did the outflow of money contribute to in Argentina?

  The Argentine economic crisis in 2001
• What is a potential consequence of hyperinflation?

  It could wipe out the value of assets
• What is a threat related to compulsory nationalisation?

  Loss of private ownership of assets
• Why might rising income and capital gains tax be a concern?

  It reduces disposable income and investment returns
• What fear arises from a government potentially defaulting on debts?

  Loss of investor confidence and financial instability
• What effect does currency depreciation have on foreign currency holdings?

  It makes foreign currencies more attractive to hold
• How can a balance of payments crisis affect the exchange rate?

  A large current account deficit can cause depreciation
• What can lead to a loss of confidence in the economy?

  A fall in world prices of key export commodities
• What fears might arise regarding a country's financial system?

  Concerns about the safety of commercial bank deposits
• What is a potential consequence of political turmoil?

  Risk of conflict and instability
• What are the main threats to an economy mentioned in the material?

  • Hyperinflation
  • Compulsory nationalisation
  • Rising income and capital gains tax
  • Government default on debts
  • Currency depreciation/devaluation
  • Balance of payments crisis
  • Loss of confidence in the economy
  • Fears over financial system stability
  • Political turmoil/risk of conflict