Question 1

Does it appear that currency boards make fixed exchange rates credible?

Accepted Answer

No,because is prohibited by law from acquiring any domestic assets,so all the currency it issues automatically is fully backed by foreign reserves.Also countries that adopt currency board,do it because one of the mayor advantage aside from the constrain it places on fiscal policy,central bank can never run out of foreign exchange reserves in the face of a speculative attack on the exchange rate.So the currency board cannot fix exchange rates.

Question 2

Contrast the crisis in Poland and Russia.Explain why the Polish economy has done better?

Accepted Answer

By the end of the 1990s,a handful of East European economies including Poland,Hungary,and the Czech Republic had made successful transitions to the entrepreneur order.Not surprisingly each of these countries was geographically close to the European Union (EU)and had a recent tradition,of industrial capitalism,including a body of contract and property law.In regards to Russia,by 1990 the Russia's government was unable to collect taxes or even to enforce basic laws;the country was riddled with corruption and organized crime.That is why the measured output got smaller progressively and the inflation was hard to control,so at the end of the 1990s most Russians were substantially worse off than under the old Soviet regime.As we can see,Poland's economy started producing more money to growth and decrease inflation because they were having business with potential firms.

Question 3

What explains the sharply divergent long-run growth patterns?

Accepted Answer

The answer lies in the economic and political features of developing countries and the way these have changed over time in response to both world events and internal pressures.

Question 4

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

Accepted Answer

The answer is probably true.Th

Question 5

The per-capita GNP of the industrial group is about ________ times that of the upper middle-income countries.

Accepted Answer

A) 6 
B) 10 
C) 15 
D) 19 
E) 2 
A) 6 
B) 10 
C) 15 
D) 19 
E) 2

Question 6

One should expect ________ relationship between annual per-capita GDP and an inverse index of corruption

Accepted Answer

A) a weak and negative 
B) a weak and positive 
C) a strong and negative 
D) a strong and positive 
E) an unpredictable 
A) a weak and negative 
B) a weak and positive 
C) a strong and negative 
D) a strong and positive 
E) an unpredictable

Question 7

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 8

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 9

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. 
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.

Question 10

Based on the 1997 Crisis and your own experience,what are the main weaknesses of the East Asian economies?

Accepted Answer

The textbook raised mainly three issues.

Question 11

For many developing countries,natural resources or agricultural commodities make up ________ share of exports

Accepted Answer

A) close to no 
B) an unimportant 
C) an important 
D) close a to 5 percent 
E) close to a 10 percent 
A) close to no 
B) an unimportant 
C) an important 
D) close a to 5 percent 
E) close to a 10 percent

Question 12

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 13

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 14

The 1980s are considered as the "lost decade" of Latin American growth.Explain why?

Accepted Answer

Just as the Great Depression made it har

Question 15

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.

Question 16

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 17

What weakness in the economic structures of Asian countries contributed to the severe financial crisis that Asian economies experienced in 1997?

Accepted Answer

A) Productivity: It increased rapidly and the countries were victims of their own success 
B) Banking regulation: Banks were excessively regulated,which reduced profits. 
C) Legal Framework: The system dealt unsuccessfully with companies in financial trouble 
D) Natural Resources: Countries' lack of natural resources and failure to explore developing industries accumulated and led to the crisis. 
E) High Taxes: High rates of taxation resulted in a reliance on imports. 
A) Productivity: It increased rapidly and the countries were victims of their own success 
B) Banking regulation: Banks were excessively regulated,which reduced profits. 
C) Legal Framework: The system dealt unsuccessfully with companies in financial trouble 
D) Natural Resources: Countries' lack of natural resources and failure to explore developing industries accumulated and led to the crisis. 
E) High Taxes: High rates of taxation resulted in a reliance on imports.

Question 18

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 19

What factors lie behind capital inflows to the developing world?

Accepted Answer

Many developing countries have received

Question 20

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 complex

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

Does it appear that currency boards make fixed exchange rates credible?

Contrast the crisis in Poland and Russia.Explain why the Polish economy has done better?

What explains the sharply divergent long-run growth patterns?

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

The per-capita GNP of the industrial group is about ________ times that of the upper middle-income countries.

One should expect ________ relationship between annual per-capita GDP and an inverse index of corruption

The following are all the forms of debt finance.

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

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

Based on the 1997 Crisis and your own experience,what are the main weaknesses of the East Asian economies?

For many developing countries,natural resources or agricultural commodities make up ________ share of exports

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

The problem of moral hazard has led

The 1980s are considered as the "lost decade" of Latin American growth.Explain why?

Seigniorage refers to

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?

What weakness in the economic structures of Asian countries contributed to the severe financial crisis that Asian economies experienced in 1997?

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

What factors lie behind capital inflows to the developing world?

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?]

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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