How has the globalization of financial markets affected the way in which countries conduct their economic policies?
What will be an ideal response?
The globalization of financial markets imparts discipline to national economic policies. In a segmented market, governments may follow bad economic policies and get away with it; since domestic residents are not allowed to invest abroad, a poor domestic economic policy is not punished by corresponding outflows of money. Opening up domestic markets to global competition allows the domestic economy to compete on international markets and will allow money to flow where investment opportunities are best.
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A front-page story in the New York Times carries the headline "War on Drugs Continues: 200 More Arrested.". On the editorial page, an opinion piece on the subject is titled "Do We Really Need the War on Drugs?" The opinion piece is more likely than the front-page story to
a. have macroeconomic content b. be fact-finding c. contain normative statements d. contain positive statements e. be less a matter of debate
The law of increasing costs indicates that
a. as more goods are produced, the dollar cost of producing those goods increases b. no matter how many goods you produce, costs tend to increase c. the opportunity cost of producing a good increases as more of the good is produced d. although total cost may increase as you produce more of a good, the opportunity cost of producing additional units of the good actually decreases e. because you are able to adopt greater division of labor when producing more goods, the opportunity cost of producing a good increases as less of the good is produced