A large government deficit relative to GDP, a high rate of money expansion accompanied by fixed exchange rates, along with substantial government expenditures are some of the common characteristics of _________ risk.

Question

Quizplus · Accepted Answer

These characteristics are typically associated with country risk, which refers to the risks inherent in investing in a particular country. High government deficits and expenditures can lead to instability and potential default on government debt, while high money expansion can lead to inflation and currency devaluation, both of which can negatively impact investments. Fixed exchange rates can also lead to challenges in pricing and hedging investments.

A Large Government Deficit Relative to GDP, a High Rate