How does globalization affect vulnerability to shocks in development and industry?

• A. Greater interdependence and exposure to cross-border disruptions
• B. No effect on risk
• C. Complete insulation from external events
• D. Guaranteed equal outcomes worldwide

Answer: (A)

Globalization increases interconnectedness and interdependence among economies, so shocks can travel quickly across borders. When countries and firms are tied together through trade, investment, and complex supply chains, a disruption in one place—like a factory shutdown, a tariff change, a financial panic, or a natural disaster—can ripple through to others via delayed shipments, higher costs, or tighter credit. This makes development projects and industries more exposed to cross-border disruptions and spillovers, raising vulnerability to external shocks.

The other ideas—no effect, complete insulation, or guaranteed equal outcomes—don’t fit because they ignore how tightly linked markets and suppliers are today; they fail to account for transmission channels that spread risks beyond borders and the uneven distribution of resilience across different countries and sectors.