Question

Some argue that letting big global banks such as Citigroup fail is not an option, as such an event would trigger panic in world financial markets and damage the world economy. Which concept describes when bad news affects exchanges in different countries at the same time?

a. Contagion
b. Net present value
c. Diversification
d. Country risk

Answer 1

Contagion is the concept that describes when bad news affects exchanges in different countries at the same time. Therefore, the correct option is A.

Step-by-step explanation:

The concept that describes when bad news affects exchanges in different countries at the same time is contagion. Contagion refers to the spread of financial distress or panic from one country to another. In the context of the question, if a big global bank like Citigroup were to fail, it could trigger panic in world financial markets, leading to a contagion effect where other countries' exchanges are also negatively impacted.