Capital controls prevent a large amount of money in and out of the economy market.
Further Explanation:
Capital Controls:
Capital controls are a technique used by the government to control the capital outflows and capital inflows in the economy market. The government does this by high or low tax rates, impose tariffs, and impose excise duty, customs duty, and liberal tax rates.
Capital controls prevent the limit of the amount transfer from the economy are the government thinks that there is a need for money in the market, the government liberals the tax rate. So that the capital inflow increases during a particular time of period. It makes domestic goods cheaper than foreign ones. Foreigners purchase more domestic goods from our country. This ultimately increases the capital inflow.
When the government thinks that there is an excess of money in the market, the government tights the tax rate. So that the capital inflow decreases, it makes domestic goods more costly than foreign goods. The foreigners are not interested in purchase the more domestic goods in our country. This ultimately decreases the capital inflow.
Therefore, the capital controls prevent the money supply in the economy.
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Answer details:
Grade: Middle School
Subject: Economics
Chapter: Capital controls
Keywords:capital controls, prevents, money supply, foreign goods, domestic goods, high or low tax rates, liberal or tight, capital inflow, capital outflow, purchases.
