Nations can lower risk via asset diversification. How do nations engage in diversification?
A) by investors relying on mutual funds instead of choosing their own stocks
B) by directing some investment activities abroad and some domestically
C) by buying private insurance against devaluation
D) by restricting all investment toward domestic capital

Question

Quizplus · Accepted Answer

By directing some investment activities abroad and some domestically, nations can spread their risk and reduce their vulnerability to domestic economic conditions. This can be achieved through various means, such as investing in foreign stocks, bonds or real estate, setting up foreign subsidiaries or joint ventures, or participating in international trade. Restricting all investment toward domestic capital or relying only on private insurance may not provide adequate diversification, while relying on mutual funds may not be a strategy that nations engage in directly.

Nations Can Lower Risk Via Asset Diversification