Question : 22.4   East Asia: Success and Crisis 1) East Asia’s crisis was : 1303747

22.4   East Asia: Success and Crisis

1) East Asia’s crisis was relatively long lived because

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.

2) In the early 1960s South Korea was an extremely poor country. However, in 1963, the country began a remarkable economic ascent. What was a direct cause of this?

A) a shift in strategy that emphasized exports rather than imports

B) an increase in wages

C) an increase in the labor force

D) an increase in the money supply

E) an emphasis on education, leading to a highly productive labor force

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

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.

4) What event started the Asian financial crisis in 1997?

A) Indonesia’s inability to pay its debts

B) devaluation of Indonesia’s currency

C) Thailand’s inability to pay its debts

D) devaluation of Thailand’s currency

E) devaluation of Malaysia’s currency

5) The problem of moral hazard has led

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.

6) How would you define a currency board?

A) the process by which non-pegged interest rates are allowed to fluctuate

B) the stockpiling of international reserves by developing countries

C) using the dollar to carry out all domestic transactions, making the domestic currency a currency in name alone

D) a constraint placed on monetary policy

E) The monetary bases is backed entirely by foreign currency and the central bank holds no domestic assets.

7) If a developing country institutes a currency board, it relinquishes control over having

A) monetary policy autonomy.

B) exchange rate stability.

C) freedom of capital movement.

D) freedom of labor movement.

E) all of its funds.

8) A currency board can ________ a country’s ability to act as a lender of last resort.

A) aggrandize

B) limit

C) enhance

D) offset

E) not affect

9) Explain why East Asian countries have done so well relative to South American countries.