Final answer:
Capital Controls are likely implemented by a country to stabilize the economy when facing substantial capital outflows, aiming to ensure a committed investment for longer terms and prevent financial crises.
Step-by-step explanation:
When substantial amounts of capital are leaving a country, causing potential economic instability, a country is likely to implement various measures to control the situation. One effective measure is the imposition of Capital Controls, which are regulatory actions to limit or restrict the flow of foreign capital in and out of the domestic economy. These controls can take various forms such as transaction taxes, restrictions on the amount of money that can be transferred overseas, or other limits imposed on foreign investments.
Capital controls can help prevent large, sudden outflows, which may lead to a depreciation of the country's currency and potentially trigger a financial crisis. The goal of these controls is often to provide stability by ensuring that investment capital remains committed for the medium to long term, rather than allowing speculative short-term capital inflows that can abruptly reverse and cause economic turmoil.