Final answer:
During the capital flight in Mexico in 1994, Mexico's net capital outflow (1) increased as investors moved their assets out of the country due to economic instability, thus leading to a financial flow out of the Mexican economy.
Step-by-step explanation:
When Mexico suffered from capital flight in 1994, net capital outflow increased.
Capital flight generally refers to the large-scale exodus of financial assets and capital from a country, which can be caused by various factors such as political instability, economic uncertainty, or the anticipation of negative events like currency devaluation. This movement of capital is often sudden and substantial.
In Mexico's case, money was flowing out of the Mexican economy at an increased rate due to capital flight. This economic phenomenon, which involves a financial flow out of the Mexican economy, thus led to an increase in net capital outflow.
The logic behind this is that as investors and capital holders transferred their assets out of Mexico to other countries, the outflow of capital exceeded any possible inflow during this period of instability.