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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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