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Please read Chapter 6: Finance and Investment and answer the following questions: (Each question is worth 24 points)
1. Explain the difference between investment and finance. What role does each play in the globalization dynamic?
2. What is the difference between short-term capital and long-term capital? Why do countries not rely on long-term capital alone so as to secure a safe path to economic development?
3. How many types of risks are associated with globalization? Explain how these risks tend to be interrelated and it is impossible to control one without impacting on the others.
4. Explain how globalization has created new challenges for conventional banking and how commercial banks have tried to meet them.
5. Compare the benefits and costs of financial globalization. Is there any reason to believe that the benefits should outweigh the costs in the long run? Why or why not?
6. What is the meaning of secular stagnation? How is it relevant in today’s world?
7. While portfolio diversification may eliminate a certain type of risk it may not be so effective in diffusing all other risks so well. Do you agree? Why or why not?
8. From what we have seen in this chapter is it reasonable to conclude that only those countries with developed capital markets stand to gain the most from globalization? Why or why not?
9. Globalization seems to have allowed a proliferation of speculative financial assets. Do you agree? Explain.
10. What are some of the challenges faced by the global economy today? Which of these might be most critical? Explain

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