There is a growing internal financial crisis in the US with the possibility that there will be de-valuation of the dollar. Which amongst the following countries is/are most affected ?

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Submitted by examrobotsa on

Q: 121 (CAPF/2011)
There is a growing internal financial crisis in the US with the possibility that there will be de-valuation of the dollar. Which amongst the following countries is/are most affected ?

question_subject: 

Economics

question_exam: 

CAPF

stats: 

0,19,43,23,19,19,1

keywords: 

{'internal financial crisis': [0, 0, 0, 1], 'dollar': [0, 1, 0, 2], 'china': [1, 0, 1, 2], 'japan': [0, 0, 1, 2], 'us': [0, 0, 2, 5], 'countries': [1, 0, 2, 6], 'india': [8, 1, 7, 13], 'european union': [0, 2, 2, 3]}

Option 1: India may not be directly affected by the internal financial crisis in the US. While the de-valuation of the dollar may have some impact on the Indian economy due to trade and investment relations with the US, it is not the most affected country in this scenario.

Option 2: China is likely to be the most affected country in this situation. China holds a significant amount of US Treasury bonds and has a high dependency on exports to the US. A de-valuation of the dollar would decrease the value of China`s holdings and make its exports to the US more expensive, potentially leading to an economic slowdown in China.

Option 3: The European Union may also be affected by the internal financial crisis in the US, but it is less likely to be as severely impacted as China. The EU has a diversified economy and is not as dependent on the US market as China.

Option 4: Japan, like China, holds a considerable amount of US Treasury bonds and has a high dependency on exports to the US. Therefore, it is likely to be affected by a de-valuation of the dollar, but not to the same extent as China.

In conclusion, option 2, China, is the most affected country in this situation due to its significant holdings of US