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Chapter 23: Q. 34 (page 577)

If a country is a big exporter, is it more exposed to global financial crises?

Short Answer

Expert verified

If a country is a big exporter, it is more exposed to global financial crises.

Step by step solution

01

Step 1. Introduction

The fact that a country is a big exporter means that it has a inflow of domestic capital and a outflow of financial capital.

02

Step 2. Reason

Export items are purchased by individuals in other countries as a result of outflows of financial capital, and so the income of the other country determines the amount of export.

A large exporting country is more exposed to financial crises since it trades internationally.

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Most popular questions from this chapter

If you observed a country with a rapidly growing trade surplus over a period of a year or so, would you be more likely to believe that the country's economy was in a period of recession or of rapid growth? Explain.

Both the United States and global economies are booming. Will U.S. imports and/or exports increase?

Does a trade surplus help to guarantee strong economic growth?

State whether each of the following events involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy:

a. Mexico imports services from Japan

b. Mexico exports goods to Canada

c. U.S. investors receive a return from past financial investments in Mexico

Many think that the size of a trade deficit is due to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.
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