Author Question: How might the globalization of financial markets affect the role of financial frictions in business ... (Read 121 times)

nramada · **on:** Jun 30, 2018

How might the globalization of financial markets affect the role of financial frictions in business fluctuations?

What will be an ideal response?

Question 2

A lump-sum tax is a tax that

A) can be avoided by strategic behavior.
B) does not depend on the actions of the economic agent being taxed.
C) does not depend on the actions of the government.
D) distorts economic decisions.

Tabitha_2016 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Globalization entails a global business cycle in which an increasing number of economies are swept along in fluctuations associated with the strategies and mechanisms of financial intermediation. When a nation's economy faces an economic disruption, whether or not associated with financial frictions, that is clearly localized (e.g., a business or political scandal) and does not call into question global financial instruments and markets, the effect of global integration is likely to be positive, supporting resource reallocation to move the affected economy beyond the crisis.

Answer to Question 2

B