Suppose that a country has a fixed exchange rate and no capital controls. Due to a political

Question:

Suppose that a country has a fixed and no capital controls. Due to a political crisis, projections for economic growth in coming years are revised sharply downward. As a result of the new projections, savers wish to purchase financial assets in other countries.
a. What is the likely effect of having savers purchase foreign assets on the ability of the country to maintain its How would the situation be different if there were a flexible Would capital controls be desirable in this situation? What if there were a flexible rate?
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...