The administrative and political distance between two trading countries reduces when
A) there are FDI restrictions in the host country.
B) there is no independent central bank in the host country.
C) there are tariffs and trade quotas in the host country.
D) there is a well-functioning capital market in the host country.

Question

Quizplus · Accepted Answer

Strong legal and ethical pillars as well as well-functioning economic institutions like capital markets and an independent central bank reduce administrative and political distance. Strong institutions, both formal and informal, reduce uncertainty, and thus reduce transaction costs.

The Administrative and Political Distance Between Two Trading Countries Reduces