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    Question

    Which of the following actions most emerging economies

    took after facing with the prospects of global stagflation, nations, feeling compelled to protect their respective economic space? I- Nation opted Protectionist Measures II- Slowed down Cross border trade III- Opened their economy more
    A Only I Correct Answer Incorrect Answer
    B Only III Correct Answer Incorrect Answer
    C I & II Correct Answer Incorrect Answer
    D II & III Correct Answer Incorrect Answer
    E I, II, & III Correct Answer Incorrect Answer

    Solution

    The Covid-19 pandemic notified by the WHO in January 2020 was the first challenge of the third decade that hit global growth. Two years later, as the global economy was recovering from the pandemic-induced output contraction, the Russia-Ukraine conflict broke out in February 2022, triggering a swing in commodity prices and, thus, accelerating existing inflationary pressures. This posed the second challenge. Soon after, the third challenge emerged when nations undertook monetary tightening to rein in inflation causing growth to weaken. Monetary tightening also drove capital flows to safe-haven US markets, contributed to rising sovereign bond yields, and depreciation of most currencies against the US dollar. The consequent increase in borrowing costs also stressed high levels of public and private debt, threatening the financial system. Faced with the prospects of global stagflation, nations, feeling compelled to protect their respective economic space, slowed cross-border trade, which posed the fourth challenge to growth.

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