Question 1

What is Argentina's Convertibility Law of April 1991? Explain.

Accepted Answer

The convertibility law is the law that m...

Question 2

The world's economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Korea fall under?

Accepted Answer

A)   low-income
B)   upper middle-income
C)   high-income
D)   lower middle-income
E)   Korea falls between low income and lower middle-income.F) A) and C)
G) A) and E)

Question 3

Which Latin American country defaulted on loans in 2005 and paid off their creditors at only 1/3 value?

Accepted Answer

A)   Argentina
B)   Brazil
C)   Chile
D)   Colombia
E)   MexicoF) A) and D)
G) A) and C)

Question 4

Explain why Argentina, one of the world's richest countries at the start of the twentieth century, has become progressively poorer relative to the industrial countries. [An alternative question: What explains Argentina's regress from riches to rags?]

Accepted Answer

As usual, the answer is comple...

Question 5

Compare currency board to conventional fixed exchange rate.

Accepted Answer

Currency board may not acquire domestic ...

Question 6

The main factors that discourage investment in capital and skills in developing countries are:

Accepted Answer

A)   political instability, insecure property rights.
B)   political instability, insecure property rights, misguided economic policies.
C)   political instability, misguided economic policies.
D)   political instability.
E)   insecure property rights, misguided economic policies.F) C) and D)
G) B) and E)

Question 7

In the instances where a loan has been issued under certain terms and has to be repaid, what happens when the borrower does not uphold these stipulations?

Accepted Answer

A)   call
B)   option
C)   payment
D)   default
E)   fraudF) C) and E)
G) A) and B)

Question 8

Explain why East Asian countries have done so well relative to South American countries.

Accepted Answer

Mainly, the reasons are: less ...

Question 9

Brazil's 1999 crisis was relatively short lived because

Accepted Answer

A)   Brazil's financial institutions had avoided borrowing all together.
B)   Brazil's financial institutions had avoided heavy borrowing in local currency.
C)   Brazil's financial institutions had avoided heavy borrowing in dollars.
D)   Brazil's financial institutions had extended low-interest loans.
E)   Brazil's financial institutions had extended high-interest loans.F) A) and B)
G) C) and D)

Question 10

Why may equity finance be preferred to debt finance for developing countries?

Accepted Answer

A)   A fall in domestic income automatically reduces the earnings of foreign shareholders without violating any loan agreement.
B)   There are laws insuring against any default with equity finance.
C)   The risk is shared between debtor and creditor with debt finance.
D)   The tax structure leaves equity finance unconstrained.
E)   Repayments are unaffected by falls in real income.F) A) and C)
G) C) and D)

Question 11

Countries in Africa have grown at rates far ________ those of the main industrial countries.

Accepted Answer

A)   below
B)   above
C)   the same
D)   above at the beginning of the period and below at the end of the period
E)   below at the beginning of the period and above at the end of the periodF) B) and D)
G) C) and E)

Question 12

Explain how Brazil was able to reduce the rate of inflation from 2,669 percent in 1994 to less than 10 percent in 1997?

Accepted Answer

By introducing a new currency and initia...

Question 13

As of 2010, how large is the debt of developing countries to the rest of the world?

Accepted Answer

A)   $350 million
B)   $350 billion
C)   $5 trillion
D)   $35 trillion
E)   $3.5 trillionF) A) and B)
G) A) and C)

Question 14

Please consider Table 22-2 below.   Assuming constant Annual Average Growth Rate in the future, calculate the output per capita for the United States and South Korea for the year 2040.

Accepted Answer

Since 2040 - 2000 = 2000 - 196...

Question 15

In 1991, Argentina established a radical institutional reform after experiencing a decade marked by financial instability. This program was called the new Convertibility Law. What did this law do?

Accepted Answer

A)   made Argentina's currency fully convertible into Eurocurrency at a fixed rate
B)   required that the monetary base be backed completely by U.S. dollars
C)   placed limits on exports of commodities
D)   made Argentina's currency fully convertible into U.S. dollars at a fixed rate and required that the monetary base be backed completely by gold or foreign currency.
E)   restricted risky international trade activity.F) B) and E)
G) B) and D)

Question 16

What event started the Asian financial crisis in 1997?

Accepted Answer

A)   Indonesia's inability to pay its debts
B)   devaluation of Indonesia's currency
C)   Thailand's inability to pay its debts
D)   devaluation of Thailand's currency
E)   devaluation of Malaysia's currencyF) D) and E)
G) A) and B)

Question 17

A considerable advantage that richer countries have over poorer ones is exemplified by the fact that:

Accepted Answer

A)   richer countries do not have to denominate their foreign debts in their own currencies.
B)   richer countries have the ability to denominate their foreign debts in foreign currencies.
C)   when demand falls for a poorer country's goods, this leads to a significant wealth transfer from foreigners to the poorer country, a kind of international insurance payment.
D)   richer countries have the ability to denominate their foreign debts in their own currencies.
E)   richer countries can extract trade advantages by using military power.F) A) and D)
G) A) and C)

Question 18

Explain the following simple algebra of moral hazard. Suppose a real estate deal, which requires 100 million as investment today will yield 120 million with probability of 10 percent and will lose 20 million with probability of 90 percent. Suppose that the interest rate is 5 percent per annum.
(a) Without government intervention, would anyone invest in this deal?
(b) Suppose that now the deal is backed by full government guarantee. What will be the outcome? Does your answer depend on the attitude of the investor toward risk?
(c) Suppose that now government guarantying only 80 percent of the initial investment. What will be the outcome? Does your answer depend on the attitude of the investor toward risk?

Accepted Answer

Answer to question 1 (a), (b), (c).
(a) ...

Question 19

A trend that has been reinforced by many developing countries is privatization. Privatization refers to:

Accepted Answer

A)   purchasing large companies and turning them into state-owned enterprises.
B)   investing government money in large, privately-owned companies.
C)   exchanging bonds for shares in state-owned enterprises.
D)   selling large state-owned enterprises to private owners in the financial sector.
E)   selling large state-owned enterprises to private owners in key areas such as electricity, telecommunications, or petroleum.F) A) and D)
G) A) and B)

Question 20

How was South Korea able to become one of the East Asian Economic Miracles?

Accepted Answer

South Korea was able to become one of th...

Exam 22: Developing Countries: Growth, Crisis, and Reform

The main factors that discourage investment in capital and skills in developing countries are:

Correct Answer
verified

Compare currency board to conventional fixed exchange rate.

Correct Answer
verified
Currency board may not acquire domestic ...
View Answer

As of 2010, how large is the debt of developing countries to the rest of the world?

Correct Answer
verified

In 1991, Argentina established a radical institutional reform after experiencing a decade marked by financial instability. This program was called the new Convertibility Law. What did this law do?

Correct Answer
verified

A trend that has been reinforced by many developing countries is privatization. Privatization refers to:

Correct Answer
verified

Explain why Argentina, one of the world's richest countries at the start of the twentieth century, has become progressively poorer relative to the industrial countries. [An alternative question: What explains Argentina's regress from riches to rags?]

Correct Answer
verified
As usual, the answer is comple...
View Answer

Brazil's 1999 crisis was relatively short lived because

Correct Answer
verified

Explain why East Asian countries have done so well relative to South American countries.

Correct Answer
verified
Mainly, the reasons are: less ...
View Answer

Please consider Table 22-2 below. Assuming constant Annual Average Growth Rate in the future, calculate the output per capita for the United States and South Korea for the year 2040.

Correct Answer
verified
Since 2040 - 2000 = 2000 - 196...
View Answer

Why may equity finance be preferred to debt finance for developing countries?

Correct Answer
verified

What is Argentina's Convertibility Law of April 1991? Explain.

Correct Answer
verified
The convertibility law is the law that m...
View Answer

How was South Korea able to become one of the East Asian Economic Miracles?

Correct Answer
verified
South Korea was able to become one of th...
View Answer

What event started the Asian financial crisis in 1997?

Correct Answer
verified

Explain how Brazil was able to reduce the rate of inflation from 2,669 percent in 1994 to less than 10 percent in 1997?

Correct Answer
verified
By introducing a new currency and initia...
View Answer

In the instances where a loan has been issued under certain terms and has to be repaid, what happens when the borrower does not uphold these stipulations?

Correct Answer
verified

Countries in Africa have grown at rates far ________ those of the main industrial countries.

Correct Answer
verified

The world's economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Korea fall under?

Correct Answer
verified

Which Latin American country defaulted on loans in 2005 and paid off their creditors at only 1/3 value?

Correct Answer
verified

Correct Answer
verified
Answer to question 1 (a), (b), (c).
(a) ...
View Answer

A considerable advantage that richer countries have over poorer ones is exemplified by the fact that:

Correct Answer
verified

Exam 22: Developing Countries: Growth, Crisis, and Reform

The main factors that discourage investment in capital and skills in developing countries are:

Correct AnswerverifiedShow Answer

Compare currency board to conventional fixed exchange rate.

Correct AnswerverifiedCurrency board may not acquire domestic ...View AnswerShow Answer

As of 2010, how large is the debt of developing countries to the rest of the world?

Correct AnswerverifiedShow Answer

In 1991, Argentina established a radical institutional reform after experiencing a decade marked by financial instability. This program was called the new Convertibility Law. What did this law do?

Correct AnswerverifiedShow Answer

A trend that has been reinforced by many developing countries is privatization. Privatization refers to:

Correct AnswerverifiedShow Answer

Explain why Argentina, one of the world's richest countries at the start of the twentieth century, has become progressively poorer relative to the industrial countries. [An alternative question: What explains Argentina's regress from riches to rags?]

Correct AnswerverifiedAs usual, the answer is comple...View AnswerShow Answer

Brazil's 1999 crisis was relatively short lived because

Correct AnswerverifiedShow Answer

Explain why East Asian countries have done so well relative to South American countries.

Correct AnswerverifiedMainly, the reasons are: less ...View AnswerShow Answer

Please consider Table 22-2 below. Assuming constant Annual Average Growth Rate in the future, calculate the output per capita for the United States and South Korea for the year 2040.

Correct AnswerverifiedSince 2040 - 2000 = 2000 - 196...View AnswerShow Answer

Why may equity finance be preferred to debt finance for developing countries?

Correct AnswerverifiedShow Answer

What is Argentina's Convertibility Law of April 1991? Explain.

Correct AnswerverifiedThe convertibility law is the law that m...View AnswerShow Answer

How was South Korea able to become one of the East Asian Economic Miracles?

Correct AnswerverifiedSouth Korea was able to become one of th...View AnswerShow Answer

What event started the Asian financial crisis in 1997?

Correct AnswerverifiedShow Answer

Explain how Brazil was able to reduce the rate of inflation from 2,669 percent in 1994 to less than 10 percent in 1997?

Correct AnswerverifiedBy introducing a new currency and initia...View AnswerShow Answer

In the instances where a loan has been issued under certain terms and has to be repaid, what happens when the borrower does not uphold these stipulations?

Correct AnswerverifiedShow Answer

Countries in Africa have grown at rates far ________ those of the main industrial countries.

Correct AnswerverifiedShow Answer

The world's economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Korea fall under?

Correct AnswerverifiedShow Answer

Which Latin American country defaulted on loans in 2005 and paid off their creditors at only 1/3 value?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAnswer to question 1 (a), (b), (c).(a) ...View AnswerShow Answer

A considerable advantage that richer countries have over poorer ones is exemplified by the fact that:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Currency board may not acquire domestic ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
As usual, the answer is comple...
View Answer

Correct Answer
verified

Correct Answer
verified
Mainly, the reasons are: less ...
View Answer

Correct Answer
verified
Since 2040 - 2000 = 2000 - 196...
View Answer

Correct Answer
verified

Correct Answer
verified
The convertibility law is the law that m...
View Answer

Correct Answer
verified
South Korea was able to become one of th...
View Answer

Correct Answer
verified

Correct Answer
verified
By introducing a new currency and initia...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Answer to question 1 (a), (b), (c).
(a) ...
View Answer

Correct Answer
verified