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Chapter 10: Q 34. (page 267)

If a country is a big exporter, is it more exposed to

global financial crises?

Short Answer

Expert verified

The country may be more exposed to financial crisis.

Step by step solution

01

Step 1. Definition

A financial crisis occurs when financial instruments and assets deplete steeply in value.

02

Step 2.

When a country is an exporter it means a high level of output and employment but also it means that there is an outflow of financial capital as the country exports more.

This means that a large part of the trade is international so the country is more exposed to global or international financial crises.

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Most popular questions from this chapter

If the trade deficit of the United States increases, how is the current account balance affected?

If a country is running a government budget surplus, why is (T – G) on the left side of the saving investment identity?

In 2001, the United Kingdom's economy exported

goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world.

a. Calculate the U.K. merchandise trade deficit for

2001.

b. Calculate the current account balance for 2001.

c. Explain how you decided whether payments on

foreign investment and government transfers

counted on the positive or the negative side of

the current account balance for the United

Kingdom in 2001.

If countries reduced trade barriers, would the

international flows of money increase?

Occasionally, a government official will argue that

a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
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