Financial globalization tends to cause an increase in: Group of answer choicestaxes on international transactions.limits on foreigners' access to domestic markets.herd behavior among investors.investors' exposure to business cycle risks.
Question
Financial globalization tends to cause an increase in: Group of answer choicestaxes on international transactions.limits on foreigners' access to domestic markets.herd behavior among investors.investors' exposure to business cycle risks.
Solution
Financial globalization tends to cause an increase in:
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Herd behavior among investors: This is because information about investment opportunities spreads quickly in a globalized financial market. Investors tend to follow the crowd in making investment decisions, which can lead to herd behavior.
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Investors' exposure to business cycle risks: In a globalized financial market, investors have access to investments in different countries. This means they are exposed to the business cycles of these countries. If a country's economy goes into recession, it can affect the returns on investments in that country. This increases the business cycle risks for investors.
Financial globalization does not necessarily lead to an increase in taxes on international transactions or limits on foreigners' access to domestic markets. These are policy decisions made by individual countries and can vary widely.
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