The vulnerability of linked economies is the main disadvantage to the development of global, online banking systems and increased foreign investments.
The main disadvantage to the development of global, online banking systems and increased foreign investments is the vulnerability of linked economies. When banks borrow in foreign currency but lend in domestic currency, and the domestic currency declines in value, their debts grow larger, potentially leading to banking system failures, as seen during the Asian Financial Crisis. U.S. banks tend to borrow in dollars, reducing this risk compared to banks borrowing in foreign currency.
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Answer:
The correct answer is:
O the vulnerability of linked economies
Explanation:
Global, online banking systems and increased foreign investments can lead to interconnectedness among economies. While this can foster economic growth and efficiency, it also increases the vulnerability of economies to shocks in other parts of the world. For example, a financial crisis in one country can quickly spread to others through interconnected financial markets, leading to economic instability. This interdependence can amplify the impact of economic downturns and increase the risk of contagion across borders.