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On Saturday March 22, 2024, an article entitled How Economic Trouble in China Could Be Propelling the Dazzling Rise of Bitcoin, appeared in The Globe

On Saturday March 22, 2024, an article entitled "How Economic Trouble in China Could Be Propelling the Dazzling Rise of Bitcoin", appeared in The Globe and Mail. The following passage appears, The Guardian recently reported that the crackdown on Chinese billionaires, sluggish growth and waning stock markets are triggering an enormous outflow of funds from China. In the first half of 2023, there was a shortfall of US$19.5 billion in China's balance of payments - an indicator of capital flight. The true figure may be many times higher. Mainland Chinese are snapping up luxury condos in Singapore and elsewhere in great numbers, and immigration consultants say many thousands of wealthy Chinese families are leaving the country. Use the DD-AA model to illustrate the effects of 'capital flight' on China's economy. (Remember, China pegs to the US dollar). Describe the two offsetting effects on the AA curve. If investment depends on the interest rate (as it surely does), how is the DD curve affected? How is equilibrium output then affected? Can capital flight explain the recent weakness in the Chinese economy

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