Question 1

Which of the following is NOT a common characteristic of a developing country?

Accepted Answer

A)  extensive direct government control of the economy 
B)  history of low inflation 
C)  many weak credit institutions 
D)  "pegged" exchange rates 
E)  agricultural commodities make up a large share of its exports 
A)  extensive direct government control of the economy 
B)  history of low inflation 
C)  many weak credit institutions 
D)  "pegged" exchange rates 
E)  agricultural commodities make up a large share of its exports B

Question 2

Does it appear that currency boards make low-inflation policies credible?

Accepted Answer

Currency boards have the power to bring in anti-inflation credibility from the country to which the domestic currency is hooked. Currency boards typically may not acquire government debt, but it can discourage fiscal deficits leading to reduce a major cause of inflation and devaluation. In order for a currency board to be successful is by increasing the banking sector and that can get the government under pressure to abandon the currency board. Moreover, if the markets anticipate that the government is leaving the currency board, the country may not benefit from the potential of a currency board.

Question 3

How would you describe the world distribution of income?

Accepted Answer

A)  persistently unequal 
B)  temporarily unequal 
C)  converging 
D)  fairly equal 
E)  completely unpredictable 
A)  persistently unequal 
B)  temporarily unequal 
C)  converging 
D)  fairly equal 
E)  completely unpredictable A

Question 4

Over the period 1960-2014, the United States economy grew at roughly

Accepted Answer

A)  2.1 percent. 
B)  3 percent. 
C)  4 percent. 
D)  one percent. 
E)  3.5 percent. 
A)  2.1 percent. 
B)  3 percent. 
C)  4 percent. 
D)  one percent. 
E)  3.5 percent.

Question 5

The term Original Sin by two economists Barry Eichengreen and Ricardo Hausmann is used to describe what?

Accepted Answer

A)  low-income economy 
B)  developing countries' inability to borrow in their own currencies 
C)  a sin that is part of the Ten Commandments 
D)  borrows not able to receive loans 
E)  not diversifying economies portfolios 
A)  low-income economy 
B)  developing countries' inability to borrow in their own currencies 
C)  a sin that is part of the Ten Commandments 
D)  borrows not able to receive loans 
E)  not diversifying economies portfolios

Question 6

In developing economies, national saving is often ________ relative to developed economies.

Accepted Answer

A)  high 
B)  the same 
C)  hard to tell 
D)  low 
E)  low for the very poor countries and high for the more developed 
A)  high 
B)  the same 
C)  hard to tell 
D)  low 
E)  low for the very poor countries and high for the more developed

Question 7

Explain the reasons for the economic "miracle" of the East Asian countries between 1960 and 1997. Is it only because of the common Asian practice of industrial policy and business-government cooperation?

Accepted Answer

Students should emphasize high

Question 8

In general, the development of underground economic activity ________ economic efficiency

Accepted Answer

A)  hinders 
B)  has no effect 
C)  aides 
D)  hard to tell, sometime hinders, sometimes aides 
E)  spikes 
A)  hinders 
B)  has no effect 
C)  aides 
D)  hard to tell, sometime hinders, sometimes aides 
E)  spikes

Question 9

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 10

Between 1960 and 2010, the annual growth rate in percent per year was the highest in

Accepted Answer

A)  China. 
B)  United States. 
C)  Brazil. 
D)  Singapore. 
E)  South Korea. 
A)  China. 
B)  United States. 
C)  Brazil. 
D)  Singapore. 
E)  South Korea.

Question 11

How would you define exchange control?

Accepted Answer

A)  The government allocates foreign exchange through decree rather than through the market. 
B)  a country NOT pegging its exchange rate 
C)  a country pegging its exchange rate 
D)  a country buying up excess current account so that CA=0 
E)  a country restricting all foreign exchange 
A)  The government allocates foreign exchange through decree rather than through the market. 
B)  a country NOT pegging its exchange rate 
C)  a country pegging its exchange rate 
D)  a country buying up excess current account so that CA=0 
E)  a country restricting all foreign exchange

Question 12

What are the three main lessons on crisis learned from early developing countries in Latin America?

Accepted Answer

A)  choosing the right exchange rate regime, the importance of contagion and the importance of the banking system 
B)  choosing the right real rate, the importance of following exchange rates, and keeping prices high to make the most profit 
C)  pegging exchange rates with Euros, keeping labor cost and wages low 
D)  maintaining money supply, avoiding tariffs, and increasing output 
E)  maintaining money supply, avoiding inflation, and increasing production 
A)  choosing the right exchange rate regime, the importance of contagion and the importance of the banking system 
B)  choosing the right real rate, the importance of following exchange rates, and keeping prices high to make the most profit 
C)  pegging exchange rates with Euros, keeping labor cost and wages low 
D)  maintaining money supply, avoiding tariffs, and increasing output 
E)  maintaining money supply, avoiding inflation, and increasing production

Question 13

The following are all the forms of debt finance.

Accepted Answer

A)  bond, bank, and official finance 
B)  bond and bank finance 
C)  bond, bank, and portfolio finance 
D)  foreign direct and portfolio investment 
E)  direct investment, stock, and dividends 
A)  bond, bank, and official finance 
B)  bond and bank finance 
C)  bond, bank, and portfolio finance 
D)  foreign direct and portfolio investment 
E)  direct investment, stock, and dividends

Question 14

In the early 1960s South Korea was an extremely poor country. However, in 1963, the country began a remarkable economic ascent. What was a direct cause of this?

Accepted Answer

A)  a shift in strategy that emphasized exports rather than imports 
B)  an increase in wages 
C)  an increase in the labor force 
D)  an increase in the money supply 
E)  an emphasis on education, leading to a highly productive labor force 
A)  a shift in strategy that emphasized exports rather than imports 
B)  an increase in wages 
C)  an increase in the labor force 
D)  an increase in the money supply 
E)  an emphasis on education, leading to a highly productive labor force

Question 15

The $50 billion emergency loan orchestrated by the U.S. Treasury and the IMF to Mexico in 1994

Accepted Answer

A)  was a disastrous policy for Mexico. 
B)  avoided a disaster to the Mexican economy. 
C)  did not affect Mexico in the short run. 
D)  did not affect Mexico in the long run. 
E)  was ineffective both in the short and long runs. 
A)  was a disastrous policy for Mexico. 
B)  avoided a disaster to the Mexican economy. 
C)  did not affect Mexico in the short run. 
D)  did not affect Mexico in the long run. 
E)  was ineffective both in the short and long runs.

Question 16

What explains the sharply divergent long-run growth patterns?

Accepted Answer

The answer lies in the economi

Question 17

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 
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

Question 18

Write an essay on the importance of a sound banking system in developing countries.

Accepted Answer

See for example the vivid exam

Question 19

Please consider Table 22-2 below.     Assuming constant Annual Average Growth Rate in the future, determine the year in which the United States will have the same output per capita as South Korea?

Accepted Answer

(34,365) (1 + 0.025 @#IMG-DLM& = (15,702

Question 20

"Developing countries should delay opening the capital account until the domestic financial system is strong enough to withstand the sometimes violent ebb and flow of world capital." Discuss.

Accepted Answer

Probably true. The issue is re

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

Which of the following is NOT a common characteristic of a developing country?

Does it appear that currency boards make low-inflation policies credible?

How would you describe the world distribution of income?

Over the period 1960-2014, the United States economy grew at roughly

The term Original Sin by two economists Barry Eichengreen and Ricardo Hausmann is used to describe what?

In developing economies, national saving is often ________ relative to developed economies.

Explain the reasons for the economic "miracle" of the East Asian countries between 1960 and 1997. Is it only because of the common Asian practice of industrial policy and business-government cooperation?

In general, the development of underground economic activity ________ economic efficiency

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?]

Between 1960 and 2010, the annual growth rate in percent per year was the highest in

How would you define exchange control?

What are the three main lessons on crisis learned from early developing countries in Latin America?

The following are all the forms of debt finance.

In the early 1960s South Korea was an extremely poor country. However, in 1963, the country began a remarkable economic ascent. What was a direct cause of this?

The $50 billion emergency loan orchestrated by the U.S. Treasury and the IMF to Mexico in 1994

What explains the sharply divergent long-run growth patterns?

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?

Write an essay on the importance of a sound banking system in developing countries.

Please consider Table 22-2 below. Assuming constant Annual Average Growth Rate in the future, determine the year in which the United States will have the same output per capita as South Korea?

"Developing countries should delay opening the capital account until the domestic financial system is strong enough to withstand the sometimes violent ebb and flow of world capital." Discuss.

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

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