How might the globalization of financial markets affect the role of financial frictions in business fluctuations?
What will be an ideal response?
Globalization entails a global business cycle in which an increasing number of economies are swept along in fluctuations associated with the strategies and mechanisms of financial intermediation. When a nation's economy faces an economic disruption, whether or not associated with financial frictions, that is clearly localized (e.g., a business or political scandal) and does not call into question global financial instruments and markets, the effect of global integration is likely to be positive, supporting resource reallocation to move the affected economy beyond the crisis.
You might also like to view...
If penalties for trading illegal drugs are instituted on both buyers and sellers, the
A) quantity might increase or decrease but the price will rise. B) price might rise or fall, but the quantity will decrease. C) price and the quantity will both decrease. D) price and the quantity will both increase.
Which of the following is FALSE about the transition from communism to capitalism in Russia and China?
A) China chose a dual track strategy. B) China's transition strategy was considered gradualist. C) Russia chose a rapid transition strategy. D) Russia's transition was aided by the large number of workers it had in heavy industry. E) China's transition was aided by the large number of workers it had in rural agriculture.