The greater the amount of short-term money invested in a country, the
A) stronger the domestic currency.
B) greater the degree of globalization.
C) greater the potential for a financial crisis.
D) lesser the chance of a speculative attack.
E) greater the long-term economic development potential.

Question

Quizplus · Accepted Answer

High short-term investment inflows can lead to financial vulnerability, as sudden withdrawals of these funds can cause a crisis. This was evidenced by the 1997 Asian financial crisis, where short-term capital inflows were one of the factors that contributed to the crisis.

The Greater the Amount of Short-Term Money Invested in a Country