4.6.8 The role of financial markets in the global economy

• What are global financial markets?

  Interconnected financial systems
• Global financial markets involve investors from multiple countries.


  True
• Match the major global financial institution with its role.

  Central Banks ↔️ Oversee monetary policy

  Commercial Banks ↔️ Provide banking services

  Investment Banks ↔️ Assist with financing
• What does the International Monetary Fund (IMF) aim to promote globally?

  Monetary cooperation
• Internationalization in global financial markets involves investors, borrowers, and intermediaries from multiple countries
• How do global financial markets facilitate efficient capital allocation?

  Flow of funds
• Global market integration can lead to a potential loss of domestic policy autonomy
• Global financial markets facilitate the flow of capital and investment, supporting economic growth
• What is one benefit of global financial markets for businesses?

  Access to capital
• Businesses use global financial instruments to hedge against risks such as currency fluctuations.


  True
• Match the key feature of global financial markets with its description:

  Internationalization ↔️ Participation of investors from multiple countries

  Integration ↔️ Interconnectedness between national markets
• Why are global financial markets crucial for the global economy?

  Efficient allocation of capital
• Global financial markets enable investors to reduce risk by diversifying their portfolios.


  True
• Order the following benefits of global financial markets for countries:

  1️⃣ Facilitate capital flow

  2️⃣ Enable risk diversification

  3️⃣ Promote financial stability
• Global financial markets support economic growth by facilitating the flow of capital and investment
• Global markets enable businesses to expand their operations and customer base
• Global financial markets facilitate the flow of capital and investment, supporting economic growth
• Businesses can use global financial instruments to hedge against currency, interest rate, and other risks
• The high degree of integration in global financial markets can limit the ability of national governments to implement monetary and fiscal policies
• National central banks oversee monetary policy and regulate domestic financial institutions
• The Financial Stability Board (FSB) coordinates global financial regulation
• Advancements in fintech, blockchain, and AI will drive financial inclusion and innovation
• Match the regulatory body with its role:

  National Central Banks ↔️ Regulate domestic financial institutions

  International Monetary Fund ↔️ Provide financial assistance to countries in crisis

  Financial Stability Board ↔️ Coordinate global financial regulation
• Arrange the key trends shaping the future of global financial markets:

  1️⃣ Globalization

  2️⃣ Technological Innovations

  3️⃣ Emerging Markets

  4️⃣ Regulatory Challenges
• Global financial markets facilitate the flow of capital, credit, and investment across national borders
• Arrange the key roles of global financial markets in the global economy.

  1️⃣ Efficient allocation of capital

  2️⃣ Risk diversification

  3️⃣ International investment and trade
• Central banks issue currency, manage interest rates, and act as lenders of last resort
• Global financial markets support global economic stability.


  True
• Match the impact of global financial markets on countries with its description.

  Facilitate investment ↔️ Support economic growth

  Increase exposure to shocks ↔️ Threaten financial stability
• What benefit do global financial markets provide to businesses?

  Access to capital
• Global financial markets reduce a country's exposure to financial volatility.

  False
• Global markets enable businesses to expand their operations and customer base internationally
• What is the primary function of global financial markets?

  Facilitate capital flow
• Deregulation in global financial markets involves reduced government control
• Match the global financial institution with its role:

  Central Banks ↔️ Oversee monetary policy

  IMF ↔️ Promote global financial stability

  World Bank ↔️ Provide loans to developing countries
• Global financial markets support international trade by financing trade transactions
• Increased exposure to external financial shocks is a benefit of global financial markets for countries.

  False
• Increased competition from foreign firms can challenge domestic businesses.


  True
• Global financial markets can limit the ability of governments to independently implement monetary policies.


  True
• Countries with highly integrated global financial markets are more vulnerable to external financial shocks.

  True