Question 1

Since foreign credit dries up in crises when it is most needed, developing countries can protect themselves from default by

Accepted Answer

A)  cutting off imports of goods. 
B)  allowing the exchange rate to float. 
C)  using equity finance only. 
D)  accumulating high levels of international reserves. 
E)  avoiding the international capital market. 
A)  cutting off imports of goods. 
B)  allowing the exchange rate to float. 
C)  using equity finance only. 
D)  accumulating high levels of international reserves. 
E)  avoiding the international capital market.

Question 2

What are the five major channels, which developing countries use to finance their external deficit?

Accepted Answer

The five major channels are bo

Question 3

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 4

What factors lie behind capital inflows to the developing world?

Accepted Answer

Many developing countries have received

Question 5

Which theory best explains the wealth inequalities amongst nations?

Accepted Answer

A)  weather 
B)  government institutions 
C)  natural selection 
D)  factors outside of any human control 
E)  levels of corruption 
A)  weather 
B)  government institutions 
C)  natural selection 
D)  factors outside of any human control 
E)  levels of corruption

Question 6

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 7

When one compares per-capital output growth rates among countries

Accepted Answer

A)  one needs to correct the data to account for departures from purchasing power parity. 
B)  such corrections are often not necessary. 
C)  such corrections are sometimes necessary. 
D)  the evidence whether such corrections are necessary are vague. 
E)  such corrections are not necessary. 
A)  one needs to correct the data to account for departures from purchasing power parity. 
B)  such corrections are often not necessary. 
C)  such corrections are sometimes necessary. 
D)  the evidence whether such corrections are necessary are vague. 
E)  such corrections are not necessary.

Question 8

Since 1960, countries in Africa have grown at rates ________ those of the main industrial countries.

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 9

During 1991, Argentina's monetary law had a currency board. Explain and give an example.

Accepted Answer

The currency board is monetary base back

Question 10

Which of the following are characteristic of a developing country?

Accepted Answer

A)  extensive embrace of free trade policies 
B)  low inflation 
C)  high national savings 
D)  a current account deficit and low national savings 
E)  strong credit institutions 
A)  extensive embrace of free trade policies 
B)  low inflation 
C)  high national savings 
D)  a current account deficit and low national savings 
E)  strong credit institutions

Question 11

When a government defaults on its obligations, the event is called a

Accepted Answer

A)  sovereign default. 
B)  magisterial default. 
C)  private default. 
D)  sudden stop default. 
E)  national default. 
A)  sovereign default. 
B)  magisterial default. 
C)  private default. 
D)  sudden stop default. 
E)  national default.

Question 12

During the time period of 1981-1983 what dramatic world issue happened?

Accepted Answer

A)  political instability, insecure property rights 
B)  stock market crashed 
C)  world wide hyperinflation 
D)  the collapse of the U.S. mortgages market 
E)  A world economic recession caused developing countries to not be able to make payments on foreign loans, in turn causing a universal default. 
A)  political instability, insecure property rights 
B)  stock market crashed 
C)  world wide hyperinflation 
D)  the collapse of the U.S. mortgages market 
E)  A world economic recession caused developing countries to not be able to make payments on foreign loans, in turn causing a universal default.

Question 13

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 14

What is the theory of Second Best?

Accepted Answer

The principal of the second be

Question 15

In 1981-1983, the world economy suffered a steep recession. Naturally, the fall in industrial countries' aggregate demand had a direct negative impact on the developing countries. What other mechanism was an even more important contributor to this event?

Accepted Answer

A)  the immediate steep inflation that followed the recession 
B)  the dollar's sharp depreciation in the foreign exchange market 
C)  the increase in primary commodity prices, increasing terms of trade in many poor countries 
D)  the collapse in primary commodity prices and the immediate, large rise in the interest burden that debtors had to pay 
E)  the influx of defaulting credit 
A)  the immediate steep inflation that followed the recession 
B)  the dollar's sharp depreciation in the foreign exchange market 
C)  the increase in primary commodity prices, increasing terms of trade in many poor countries 
D)  the collapse in primary commodity prices and the immediate, large rise in the interest burden that debtors had to pay 
E)  the influx of defaulting credit

Question 16

Describe the Asian financial crisis as it unfolds beginning with the devaluation of the Thai currency in July 1997, followed by the Malaysian, Indonesian and South Korean crises. As part of your answer, elaborate on the Malaysian response to the crisis versus its troubled neighbors' responses.

Accepted Answer

Students should emphasize the relation t

Question 17

Which of the following economic lessons should we take from developing country crises in Latin America (and elsewhere)?

Accepted Answer

A)  only that it is important to choose the right exchange rate regime 
B)  only that banking is of central importance in any government 
C)  the order in which reform measures are implemented are irrelevant 
D)  It is important to choose the right exchange rate regime and banking is of central importance in any government. 
E)  The order in which reform measures are implemented are irrelevant and banking is of central importance in any government. 
A)  only that it is important to choose the right exchange rate regime 
B)  only that banking is of central importance in any government 
C)  the order in which reform measures are implemented are irrelevant 
D)  It is important to choose the right exchange rate regime and banking is of central importance in any government. 
E)  The order in which reform measures are implemented are irrelevant and banking is of central importance in any government.

Question 18

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 19

What is the basic problem of developing countries?

Accepted Answer

A)  corruption 
B)  murder 
C)  poverty 
D)  stock market 
E)  natural resources 
A)  corruption 
B)  murder 
C)  poverty 
D)  stock market 
E)  natural resources

Question 20

Explain what the four main categories of world economies are and give examples?

Accepted Answer

The four main categories of the world ec

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

Since foreign credit dries up in crises when it is most needed, developing countries can protect themselves from default by

What are the five major channels, which developing countries use to finance their external deficit?

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.

What factors lie behind capital inflows to the developing world?

Which theory best explains the wealth inequalities amongst nations?

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

When one compares per-capital output growth rates among countries

Since 1960, countries in Africa have grown at rates ________ those of the main industrial countries.

During 1991, Argentina's monetary law had a currency board. Explain and give an example.

Which of the following are characteristic of a developing country?

When a government defaults on its obligations, the event is called a

During the time period of 1981-1983 what dramatic world issue happened?

How would you define exchange control?

What is the theory of Second Best?

In 1981-1983, the world economy suffered a steep recession. Naturally, the fall in industrial countries' aggregate demand had a direct negative impact on the developing countries. What other mechanism was an even more important contributor to this event?

Describe the Asian financial crisis as it unfolds beginning with the devaluation of the Thai currency in July 1997, followed by the Malaysian, Indonesian and South Korean crises. As part of your answer, elaborate on the Malaysian response to the crisis versus its troubled neighbors' responses.

Which of the following economic lessons should we take from developing country crises in Latin America (and elsewhere)?

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

What is the basic problem of developing countries?

Explain what the four main categories of world economies are and give examples?

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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