It is unclear whether the free flow of capital is beneficial to all countries. Explain the benefits and costs of allowing capital to move freely
What will be an ideal response?
On the one hand, foreign capital inflows are beneficial because they enable countries to increase their investments in factories, ports, and other physical assets that help raise living standards and incomes. On the other hand, the sudden outward flight of foreign financial capital can generate a debt crisis and throw a country into deep depression. Extreme volatility in some financial markets and the severe damage it has caused to many countries has revived interest in regulations to limit the damage caused by unexpectedly large financial outflows.
You might also like to view...
In the figure above, when the price of a CD is $8.00, total producer surplus from all the CDs will be
A) zero. B) greater than at $10.00 per CD. C) $20 million. D) $10 million.
Consumer spending is considered a determinant of economic growth
a. True b. False Indicate whether the statement is true or false
Some argue that many countries have observed the experience of other countries that have grown more quickly and have ______________ it.
a. collapsed because of b. learned from c. settled because of d. stalled because of
The sticky-wage theory of the short-run aggregate-supply curve says that when the price level is higher than expected,
a) relative to prices wages are lower and employment rises. b) relative to prices wages are higher and employment rises. c) relative to prices wages are higher and employment falls. d) relative to prices wages are lower and employment falls.