Question 1

The term contagion refers to

Accepted Answer

A)  a government's complete control over it's banking system. 
B)  a drop in interest rates across industrialized countries. 
C)  the vulnerability of healthy economies to crises generated by events elsewhere. 
D)  a directed attack on one market by a foreign market. 
E)  a side effect of international trade. 
A)  a government's complete control over it's banking system. 
B)  a drop in interest rates across industrialized countries. 
C)  the vulnerability of healthy economies to crises generated by events elsewhere. 
D)  a directed attack on one market by a foreign market. 
E)  a side effect of international trade.

Question 2

The real resource a government earns when it prints money and spends it on goods and services is called

Accepted Answer

A)  seigniorage. 
B)  control of capital movements by limiting foreign exchange transactions. 
C)  pure profits. 
D)  inflation profits. 
E)  greenback. 
A)  seigniorage. 
B)  control of capital movements by limiting foreign exchange transactions. 
C)  pure profits. 
D)  inflation profits. 
E)  greenback.

Question 3

Most developing countries have tried to

Accepted Answer

A)  liberalize capital movement. 
B)  control capital movements. 
C)  Hard to tell from the data. 
D)  in the 1960s and 1970s control, now to liberalize. 
E)  in the 1960s and 1970s liberalize, now to control. 
A)  liberalize capital movement. 
B)  control capital movements. 
C)  Hard to tell from the data. 
D)  in the 1960s and 1970s control, now to liberalize. 
E)  in the 1960s and 1970s liberalize, now to control.

Question 4

"Trade liberalization should precede capital account liberalization." Discuss.

Accepted Answer

The answer is probably true. T

Question 5

Until recently, per-capita income increased in East Asian countries such as Hong Kong, Singapore, South Korea, and Taiwan by ________-fold every generation

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
E)  1 
A)  2 
B)  3 
C)  4 
D)  5 
E)  1

Question 6

Please consider Table 22-2 below.     At that Annual Average Growth Rate, how many years does it take for the output per capita to double in both the United States and South Korea.

Accepted Answer

United States
(1 + 0.025 @#IMG-DLM& = 2
t = ln(2)

Question 7

East Asia's crisis was relatively long lived because

Accepted Answer

A)  East Asia's financial institutions had encouraged borrowing all together. 
B)  East Asia's financial institutions had encouraged heavy borrowing in local currency. 
C)  East Asia's financial institutions had extended low-interest loans. 
D)  East Asia's financial institutions had extended high-interest loans. 
E)  East Asia's financial institutions had encouraged heavy borrowing in dollars. 
A)  East Asia's financial institutions had encouraged borrowing all together. 
B)  East Asia's financial institutions had encouraged heavy borrowing in local currency. 
C)  East Asia's financial institutions had extended low-interest loans. 
D)  East Asia's financial institutions had extended high-interest loans. 
E)  East Asia's financial institutions had encouraged heavy borrowing in dollars.

Question 8

Economists Eichengreen and Hausmann coined the phrase original sin to describe developing countries inability to borrow in their own currencies. Where do they believe that this inability comes from? What are other beliefs on this topic?

Accepted Answer

Eichengreen and Hausmann believe that th

Question 9

Explain why despite enormous natural resources, much of Latin America's population remains in poverty and the region has been repeatedly experiencing financial crises.

Accepted Answer

Most Latin America population remains in

Question 10

Which of the following countries had a larger growth rate since 1960?

Accepted Answer

A)  U.S. 
B)  Senegal 
C)  South Korea 
D)  Kamul 
E)  Colombia 
A)  U.S. 
B)  Senegal 
C)  South Korea 
D)  Kamul 
E)  Colombia

Question 11

Explain the extensive economic role of government within a developing country.

Accepted Answer

An open question. Students should includ

Question 12

The problem of moral hazard has led

Accepted Answer

A)  the governments of many developing countries to guarantee repayment of all loans. 
B)  to higher growth rates in Latin America. 
C)  to excessively speculative investment. 
D)  to both privilege and responsibility of creditors. 
E)  to stable investments with small and steady expected gains. 
A)  the governments of many developing countries to guarantee repayment of all loans. 
B)  to higher growth rates in Latin America. 
C)  to excessively speculative investment. 
D)  to both privilege and responsibility of creditors. 
E)  to stable investments with small and steady expected gains.

Question 13

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. 
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.

Question 14

There are many ways developing countries finance their external deficits EXCEPT

Accepted Answer

A)  bank finance. 
B)  portfolio investment in ownership of firms. 
C)  bond finance. 
D)  official lending. 
E)  foreign exchange rates. 
A)  bank finance. 
B)  portfolio investment in ownership of firms. 
C)  bond finance. 
D)  official lending. 
E)  foreign exchange rates.

Question 15

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. 
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.

Question 16

How would you define convergence?

Accepted Answer

A)  tendency for gaps between industrial countries' per-capital incomes to narrow 
B)  tendency for gaps between all countries' per-capital incomes to narrow 
C)  the theory that a crisis in a low-income country will spread to all countries, regardless of debt structure 
D)  the theory that a crisis in a low-income country will spread to only those countries which had lent money to the original country 
E)  tendency for the world distribution of income to be persistently unequal 
A)  tendency for gaps between industrial countries' per-capital incomes to narrow 
B)  tendency for gaps between all countries' per-capital incomes to narrow 
C)  the theory that a crisis in a low-income country will spread to all countries, regardless of debt structure 
D)  the theory that a crisis in a low-income country will spread to only those countries which had lent money to the original country 
E)  tendency for the world distribution of income to be persistently unequal

Question 17

Since 1960, South Korea and Singapore enjoyed average per-capita growth rates ________ the average industrialized world.

Accepted Answer

A)  far below 
B)  far above 
C)  about the same 
D)  slightly below 
E)  slightly above 
A)  far below 
B)  far above 
C)  about the same 
D)  slightly below 
E)  slightly above

Question 18

What is the theory of Second Best?

Accepted Answer

The principal of the second be

Question 19

Explain why an exchange rate-based stabilization plan may result in a real appreciation?

Accepted Answer

Real appreciation may result for any of

Question 20

Seigniorage refers to

Accepted Answer

A)  real resources a government earns when it prints money to use for spending on goods and services. 
B)  nominal resources a government earns when it prints money to use for spending on goods and services. 
C)  real resources a government earns when it prints money. 
D)  nominal resources a government earns when it prints money. 
E)  real resources a government earns when it issues bonds to use for spending on goods and services. 
A)  real resources a government earns when it prints money to use for spending on goods and services. 
B)  nominal resources a government earns when it prints money to use for spending on goods and services. 
C)  real resources a government earns when it prints money. 
D)  nominal resources a government earns when it prints money. 
E)  real resources a government earns when it issues bonds to use for spending on goods and services.

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

The term contagion refers to

The real resource a government earns when it prints money and spends it on goods and services is called

Most developing countries have tried to

"Trade liberalization should precede capital account liberalization." Discuss.

Until recently, per-capita income increased in East Asian countries such as Hong Kong, Singapore, South Korea, and Taiwan by ________-fold every generation

Please consider Table 22-2 below. At that Annual Average Growth Rate, how many years does it take for the output per capita to double in both the United States and South Korea.

East Asia's crisis was relatively long lived because

Economists Eichengreen and Hausmann coined the phrase original sin to describe developing countries inability to borrow in their own currencies. Where do they believe that this inability comes from? What are other beliefs on this topic?

Explain why despite enormous natural resources, much of Latin America's population remains in poverty and the region has been repeatedly experiencing financial crises.

Which of the following countries had a larger growth rate since 1960?

Explain the extensive economic role of government within a developing country.

The problem of moral hazard has led

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

There are many ways developing countries finance their external deficits EXCEPT

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

How would you define convergence?

Since 1960, South Korea and Singapore enjoyed average per-capita growth rates ________ the average industrialized world.

What is the theory of Second Best?

Explain why an exchange rate-based stabilization plan may result in a real appreciation?

Seigniorage refers to

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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