Which of the Following Is Not a Potential Problem for Emerging

question 28

Multiple Choice

Which of the following is not a potential problem for emerging economies which liberalize their capital accounts to allow funds to flow in from developed countries?

• A) Asymmetric information can cause funds to be directed into unprofitable sectors
• B) A sudden withdrawal of foreign funds could create a recession
• C) A weak banking sector can generate excessive risk taking as funds flow in
• D) The inflows may be volatile and thus unpredictable
• E) Investment could exceed the level of domestic saving

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Definitions:

Russian Ruble

The official currency of the Russian Federation, symbolized by RUB, and used within its economic transactions.

U.S. Dollar

The official currency of the United States, widely used as a standard of exchange in international transactions.

Brazilian Real

The official currency of Brazil, represented by the symbol R$ and subdivided into 100 centavos.

U.S. Currency

The currency issued by the United States, primarily consisting of banknotes and coins denominated in dollars and cents.