Question 1

Since the 1980s, the United States has been the dominant net lender in the world.

Accepted Answer

A) True 
 B)False  False

Question 2

In a typical domestic lending boom, almost all of the amount borrowed is dedicated toward investments to bring about substantial future gains.

Accepted Answer

A) True 
 B)False  True

Question 3

During the crises of the 1990s, restructuring of bank debt was difficult as the number of debtor and creditor countries was significantly large.

Accepted Answer

A) True 
 B)False  False

Question 4

One of the usual policy changes included in an IMF prescription is:

Accepted Answer

A) temporary cartels in domestic product markets. 
B) changes in fiscal policy to reduce the government budget deficit. 
C) increased barriers to imports. 
D) decreased regulation of public sector enterprises. 
A) temporary cartels in domestic product markets. 
B) changes in fiscal policy to reduce the government budget deficit. 
C) increased barriers to imports. 
D) decreased regulation of public sector enterprises.

Question 5

Which is NOT a potential cost faced by nations that choose against repaying their debts?

Accepted Answer

A) A loss of future creditworthiness 
B) A loss of foreign assets 
C) Moral hazard 
D) Domestic recession 
A) A loss of future creditworthiness 
B) A loss of foreign assets 
C) Moral hazard 
D) Domestic recession

Question 6

Which of the following is NOT associated with debt restructuring?

Accepted Answer

A) Capital controls 
B) Debt rescheduling 
C) Debt reduction 
D) Collective action clauses 
A) Capital controls 
B) Debt rescheduling 
C) Debt reduction 
D) Collective action clauses

Question 7

The low-rate loans that are to be repaid within 10 years seem to be a form of _____ as they shift the IMF to a role as a development organization.

Accepted Answer

A) stand-by arrangements 
B) mission creep 
C) moral hazard 
D) tequila effect 
A) stand-by arrangements 
B) mission creep 
C) moral hazard 
D) tequila effect

Question 8

Which of the following explains the spread of financial crises from one country to another?

Accepted Answer

A) Global contagion 
B) Moral hazard 
C) Butterfly trade 
D) The Doppler effect 
A) Global contagion 
B) Moral hazard 
C) Butterfly trade 
D) The Doppler effect

Question 9

Which of the following is a plausible effect of a rescue package provided to a country?

Accepted Answer

A) It can stimulate the outflow of capital from the country. 
B) The rescue package can limit any contagion effects. 
C) It immediately restarts new private foreign lending to the country. 
D) It can help avoid the problem of moral hazard. 
A) It can stimulate the outflow of capital from the country. 
B) The rescue package can limit any contagion effects. 
C) It immediately restarts new private foreign lending to the country. 
D) It can help avoid the problem of moral hazard.

Question 10

The amount by which debt obligations exceed the present value of the payments that will be made to service the debts is called:

Accepted Answer

A) sovereign debt. 
B) debt swap. 
C) debt overhang. 
D) debt restructuring. 
A) sovereign debt. 
B) debt swap. 
C) debt overhang. 
D) debt restructuring.

Question 11

Small open economies are probably more vulnerable to contagion than large and relatively closed economies.

Accepted Answer

A) True 
 B)False

Question 12

Explain how the debt crisis of 1982 began and ended. What precipitated the crisis? What brought about an end to the crisis?

Accepted Answer

The oil shocks of the 1970s led to a sur

Question 13

Which of the following resulted in a surge in international lending to developing countries in the mid-1970s to early 1980s?

Accepted Answer

A) Oil-exporting countries had a low short-run propensity to save out of their extra income. 
B) The real interest rates in the industrial countries were significantly high. 
C) The governments of the developing countries encouraged foreign direct investment (FDI) and foreign institutional investments (FII). 
D) Lending to developing countries gained momentum through "herding" behavior. 
A) Oil-exporting countries had a low short-run propensity to save out of their extra income. 
B) The real interest rates in the industrial countries were significantly high. 
C) The governments of the developing countries encouraged foreign direct investment (FDI) and foreign institutional investments (FII). 
D) Lending to developing countries gained momentum through "herding" behavior.

Question 14

Since 2000 developing countries received large net capital inflows in the form of:

Accepted Answer

A) foreign direct investments. 
B) short-term lending. 
C) official loans from foreign governments and the IMF. 
D) debt service. 
A) foreign direct investments. 
B) short-term lending. 
C) official loans from foreign governments and the IMF. 
D) debt service.

Question 15

Which of the following countries reported an inflation rate of over 2,000 percent per year during the late 1980s?

Accepted Answer

A) Mexico 
B) Russia 
C) Turkey 
D) Argentina 
A) Mexico 
B) Russia 
C) Turkey 
D) Argentina

Question 16

Explain four reform measures that have been suggested to reduce the possibility and frequency of international financial crises.

Accepted Answer

Here are four reforms.
-Developing count

Question 17

Official lending and investing are usually done by:

Accepted Answer

A) multinational enterprises. 
B) private individuals when purchasing government bonds. 
C) governments or multilateral institutions. 
D) commercial banks. 
A) multinational enterprises. 
B) private individuals when purchasing government bonds. 
C) governments or multilateral institutions. 
D) commercial banks.

Question 18

As the financial crisis of 2007 began, the key issue was limited access to funding for banks and other financial institutions.

Accepted Answer

A) True 
 B)False

Question 19

One reason why the currency-board experience of Argentina failed is because of the weakening of the dollar against other currencies.

Accepted Answer

A) True 
 B)False

Question 20

If international financial transactions are prohibited:

Accepted Answer

A) lenders in the richer countries will probably earn high rates of return. 
B) borrowers in poorer countries will probably pay low interest rates. 
C) lenders in the richer countries will probably earn low rates of return. 
D) exchange rates cannot remain fixed. 
A) lenders in the richer countries will probably earn high rates of return. 
B) borrowers in poorer countries will probably pay low interest rates. 
C) lenders in the richer countries will probably earn low rates of return. 
D) exchange rates cannot remain fixed.

Exam 21: International Lending and Financial Crises

Since the 1980s, the United States has been the dominant net lender in the world.

In a typical domestic lending boom, almost all of the amount borrowed is dedicated toward investments to bring about substantial future gains.

During the crises of the 1990s, restructuring of bank debt was difficult as the number of debtor and creditor countries was significantly large.

One of the usual policy changes included in an IMF prescription is:

Which is NOT a potential cost faced by nations that choose against repaying their debts?

Which of the following is NOT associated with debt restructuring?

The low-rate loans that are to be repaid within 10 years seem to be a form of _____ as they shift the IMF to a role as a development organization.

Which of the following explains the spread of financial crises from one country to another?

Which of the following is a plausible effect of a rescue package provided to a country?

The amount by which debt obligations exceed the present value of the payments that will be made to service the debts is called:

Small open economies are probably more vulnerable to contagion than large and relatively closed economies.

Explain how the debt crisis of 1982 began and ended. What precipitated the crisis? What brought about an end to the crisis?

Which of the following resulted in a surge in international lending to developing countries in the mid-1970s to early 1980s?

Since 2000 developing countries received large net capital inflows in the form of:

Which of the following countries reported an inflation rate of over 2,000 percent per year during the late 1980s?

Explain four reform measures that have been suggested to reduce the possibility and frequency of international financial crises.

Official lending and investing are usually done by:

As the financial crisis of 2007 began, the key issue was limited access to funding for banks and other financial institutions.

One reason why the currency-board experience of Argentina failed is because of the weakening of the dollar against other currencies.

If international financial transactions are prohibited:

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

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