Author Question: Proponents of ISI assumed that governments A) were capable of identifying and correcting market ... (Read 93 times)

savannahhooper · **on:** Jun 30, 2018

Proponents of ISI assumed that governments

A) were capable of identifying and correcting market failures.
B) were capable of identifying and correcting the excesses of economic populists.
C) should enact orthodox stabilization plans.
D) could control the terms of trade.

Question 2

It is unclear whether the free flow of capital is beneficial to all countries. Explain the benefits and costs of allowing capital to move freely.

What will be an ideal response?

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

Answer to Question 1

A

Answer to Question 2

On the one hand, foreign capital inflows are beneficial because they enable countries to increase their investments in factories, ports, and other physical assets that help raise living standards and incomes. On the other hand, the sudden outward flight of foreign financial capital can generate a debt crisis and throw a country into deep depression. Extreme volatility in some financial markets and the severe damage it has caused to many countries has revived interest in regulations to limit the damage caused by unexpectedly large financial outflows.