Final answer:
Greater transparency in financial reporting leads to enhanced economic confidence among citizens, driving investment, customer loyalty, and ultimately, economic growth. Consequently, citizens tend to have greater confidence in an economy with transparent financial standards.
Step-by-step explanation:
When a nation's standards of financial report are transparent and effective, it leads to a multitude of positive outcomes for the economy. One such outcome is that citizens tend to have greater confidence in the economy. This is because transparency in financial reporting ensures that businesses and the government are accountable, making the economic environment more stable and predictable for investors and consumers.
Businesses benefit from this trust through increased investment and customer loyalty, which can lead to higher profits. Moreover, a clear and effective legal system that upholds property and contractual rights encourages entrepreneurship and deters corruption. This provides an environment where labor productivity and economic growth are more likely to flourish, benefitting the entire nation.
In contrast, countries that lack transparent and effective financial reporting, and whose legal systems do not effectively protect rights, often suffer declines in their economic performance, as seen in the lower GDP per capita in nations such as Afghanistan, the Central African Republic, and Zimbabwe. Therefore, the answer is that when financial reporting standards are transparent and effective, C. Citizens tend to have greater confidence in the economy.