Question 1

A flexible exchange rate system crisis involves

Accepted Answer

A)  a revaluation of the currency.
B)  a rapid and uncontrolled depreciation of the currency.
C)  a decrease in the dollar value of the country's international debt.
D)  a sure political collapse of the ruling government.

Question 2

Some countries have borrowed as much as 500 percent of their IMF quotas.

Accepted Answer

A) True 
 B)False

Question 3

What are the costs of capital mobility?

Accepted Answer

The cost is potentia...

Question 4

IMF conditionality may include

Accepted Answer

A)  changes in the fiscal and monetary policies of the country facing the financial crisis.
B)  changes in the exchange rate policies.
C)  regulating and restructuring the financial sector of the economy of the country in crisis.
D)  political regime change.

Question 5

Explain the meaning of IMF conditionality and why it has been criticized.

Accepted Answer

IMF conditionality refers to the changes...

Question 6

The Mexican peso crisis of 1994 and 1995 was directly related to

Accepted Answer

A)  a large capital account surplus.
B)  a large capital account deficit.
C)  an undervalued peso.
D)  a large current account surplus.

Question 7

All of the following issues have been discussed as options for reforming the international financial architecture except

Accepted Answer

A)  how high an interest rate the lender of last resort should charge when it makes loans.
B)  the length of the payback period.
C)  the size of the loans.
D)  if the lender of last resort (i.e., the IMF) should consult and collaborate with other international institutions such as the United Nations and the WTO.

Question 8

When expansionary fiscal and monetary policies are joined with a ________ exchange rate system,the various components of economic policy often interact in ways that lead to a crisis followed by a steep recession.

Accepted Answer

A)  fixed
B)  floating
C)  crawling peg
D)  flexible

Question 9

How were macroeconomic balances different in the period from 2000 to 2007 from past financial crises?

Accepted Answer

There was not an issue with devaluing ex...

Question 10

The 2007 subprime crisis spread easily because

Accepted Answer

A)  the United States is an important economy.
B)  banks in other countries had purchased assets that depended on the U.S. housing market.
C)  there was speculation against the U.S. dollar.
D)  the Fed failed to act at the right time.

Question 11

The two main types of economies generating current account surpluses from 2000 to 2007 were Asian exporters and oil producers.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a macroeconomic factor that contributed to the financial crisis in 2007?

Accepted Answer

A)  Global saving and investment imbalances
B)  Financial market innovation
C)  Deeper levels of integration across financial markets
D)  Challenges and failures in financial regulation

Question 13

It is normal and typical in a debt crisis for debtors to completely repudiate all their debts.

Accepted Answer

A) True 
 B)False

Question 14

It should be possible to avoid intensifying crises when there are weak financial sectors if

Accepted Answer

A)  banks pay closer attention to the maturity match between their debts and assets.
B)  governments do not run budget deficits.
C)  current account deficits are moderate.
D)  banks do not lend to unworthy creditors.

Question 15

Disintermediation is a problem associated with a banking crisis.

Accepted Answer

A) True 
 B)False

Question 16

Financial crises due to weak financial sectors can often be avoided if international lenders respond appropriately.

Accepted Answer

A) True 
 B)False

Question 17

An austerity policy is

Accepted Answer

A)  an increase in the money supply.
B)  an expenditure reduction and expenditure switching policy.
C)  an expansionary fiscal policy accompanied by decreases in taxes, increases in expenditures, or both.
D)  an exchange rate switching policy from a fixed to a flexible exchange rate system.

Question 18

Describe the background factors that contributed to the Asian financial crisis.

Accepted Answer

Investors were seeking higher growth and...

Question 19

Describe the Mexican peso crisis in terms of the imbalances that caused it,the policies Mexico used to respond,and the lessons learned.

Accepted Answer

Macroeconomic imbalances included an ove...

Question 20

In theory,the free movement of capital raises world welfare because

Accepted Answer

A)  it reduces inflation in some countries.
B)  it reduces the chance of financial crises.
C)  it allows countries to invest more than they could with domestic savings alone.
D)  it increases world income equality.

Exam 12: International Financial Crises

An austerity policy is

Correct AnswerverifiedShow Answer

It should be possible to avoid intensifying crises when there are weak financial sectors if

Correct AnswerverifiedShow Answer

What are the costs of capital mobility?

Correct AnswerverifiedThe cost is potentia...View AnswerShow Answer

Which of the following is a macroeconomic factor that contributed to the financial crisis in 2007?

Correct AnswerverifiedShow Answer

Describe the background factors that contributed to the Asian financial crisis.

Correct AnswerverifiedInvestors were seeking higher growth and...View AnswerShow Answer

Some countries have borrowed as much as 500 percent of their IMF quotas.

Correct AnswerverifiedShow Answer

A flexible exchange rate system crisis involves

Correct AnswerverifiedShow Answer

All of the following issues have been discussed as options for reforming the international financial architecture except

Correct AnswerverifiedShow Answer

In theory,the free movement of capital raises world welfare because

Correct AnswerverifiedShow Answer

Disintermediation is a problem associated with a banking crisis.

Correct AnswerverifiedShow Answer

When expansionary fiscal and monetary policies are joined with a ________ exchange rate system,the various components of economic policy often interact in ways that lead to a crisis followed by a steep recession.

Correct AnswerverifiedShow Answer

Describe the Mexican peso crisis in terms of the imbalances that caused it,the policies Mexico used to respond,and the lessons learned.

Correct AnswerverifiedMacroeconomic imbalances included an ove...View AnswerShow Answer

How were macroeconomic balances different in the period from 2000 to 2007 from past financial crises?

Correct AnswerverifiedThere was not an issue with devaluing ex...View AnswerShow Answer

IMF conditionality may include

Correct AnswerverifiedShow Answer

Financial crises due to weak financial sectors can often be avoided if international lenders respond appropriately.

Correct AnswerverifiedShow Answer

The two main types of economies generating current account surpluses from 2000 to 2007 were Asian exporters and oil producers.

Correct AnswerverifiedShow Answer

The 2007 subprime crisis spread easily because

Correct AnswerverifiedShow Answer

It is normal and typical in a debt crisis for debtors to completely repudiate all their debts.

Correct AnswerverifiedShow Answer

The Mexican peso crisis of 1994 and 1995 was directly related to

Correct AnswerverifiedShow Answer

Explain the meaning of IMF conditionality and why it has been criticized.

Correct AnswerverifiedIMF conditionality refers to the changes...View AnswerShow Answer

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The cost is potentia...
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Investors were seeking higher growth and...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Macroeconomic imbalances included an ove...
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Correct Answer
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There was not an issue with devaluing ex...
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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IMF conditionality refers to the changes...
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