"Developing countries should delay opening the capital account until the domestic financial system is strong enough to withstand the sometimes violent ebb and flow of world capital." Discuss
What will be an ideal response?
Probably true. The issue is related to the theory of second best and the proper sequence of reform measures. Of course, students may argue against such step-by-step measures.
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Which of the following changes will cause a downward movement along the demand curve for reserves?
A) A decrease in deposits held by banks B) A decrease in the federal funds rate C) An increase in deposits held by banks D) An increase in the federal funds rate
The Fed raises the federal funds rate. Which of the following changes takes the longest time before it occurs?
A) Quantity of money decreases. B) Exchange rate rises. C) Supply of loanable funds decreases. D) Aggregate demand decreases. E) Short-term interest rates rise.
Free markets produce relatively high levels of efficiency but low rates of growth.
Answer the following statement true (T) or false (F)
Which central coordination task has claimed the most attention of central planners?
a. Output selection b. Production planning c. Distribution d. Rationing