ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capital flight, in economics, occurs when assets or money rapidly flow out of a country, due to an event of economic consequence or as the result of a political event such as regime change or economic globalization.

Detailed explanation-2: -The correct option is (c). Capital flight refers to the high international mobility of speculative funds, caused by variations in exchange rates.

Detailed explanation-3: -Capital flight can occur in both developed and developing countries. However, developing nations are more prone to significant and rapid outflows of capital due to less developed political and judicial institutions.

Detailed explanation-4: -The term “capital flight” typically refers to short-term speculative capital outflows. It involves “hot money” that responds to political or financial crises, heavier taxes, a prospective tightening of capital controls or major devalua-tion of the domestic currency, or actual or incipient hyperinflation.