Question

Competition between developed nations have far-reaching consequences on the finance markets- name some and discuss each?

Answer 1

Ans) The competition between developed nations have profound impact on the finance market. This can be understood from the recent trade war between India and China.The reason for the conflict is the high tarrifs and devaluation of the currency to gain from the exports as a charged leived by the US.The other reasons are intellectual rights issues.The number one economy US and number two economy China dominate the financial world.And a trade war between the two leads to a misbalance of flow of capital and it also leads to a misbalance in the foreign exchange.Such kind of trade war leads to protectionism and it makes the countri's imports costly that will results in the misbalance in the balance of trade and leads to decrease in consumption and intern create the monopoly in the domestic economy which leads to inadeqaute availibilty of funds in the domestic economy for the smaller business.The world financial market will suffer as due to such factors the stock markets across the world will lead to huge losses for the investors as because of the fear of decline in the globalisation and free trade.The companies operating in China which are US and the companies operating in US which are Chinese will face additional burden of taxes on their products that will results in the fall in the prices of their stocks.The effects of trade war is profound and it will lead to cumulative effects on the cost of capital and intern the debt -servicing capabilities of the ompanies of both the countries.The trade war has resulted in the decline in the Soverign debt funds an instruments used to finance goverments by another nations and incidence like trade war between China and US has resulted in the above cause.