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In the context of open economy, assume that a financial crisis in Home country leads to...

In the context of open economy, assume that a financial crisis in Home country leads to a capital flight. As an economist of the Home country, you are required to do the following two tasks.

  1. 1) Draw a three-panel diagram to illustrate the effects of capital flight on the real interest rate, net capital outflow, real exchange rate and net export.

  2. 2) Explain how capital flight might affect economic growth.

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