Question :
22.3 Developing-Country Borrowing and Debt
1) In developing economies, national saving : 1303739
22.3 Developing-Country Borrowing and Debt
1) In developing economies, national saving is often ________ relative to developed economies.
A) high
B) the same
C) hard to tell
D) low
E) low for the very poor countries and high for the more developed
2) The Convertibility Law of April 1991 in Argentina
A) pegged the Argentinean currency to the US dollar at a ratio of one to one.
B) pegged the Argentinean currency to the US dollar at a ratio of one to two.
C) pegged the Argentinean currency to the US dollar at a ratio of one to 0.5.
D) represents an era of floating exchange rate in Argentina.
E) pegged the Argentinean currency to the British pound at a ratio of one to one.
3) The $50 billion emergency loan orchestrated by the U.S. Treasury and the IMF to Mexico in 1994
A) was a disastrous policy for Mexico.
B) avoided a disaster to the Mexican economy.
C) did not affect Mexico in the short run.
D) did not affect Mexico in the long run.
E) was ineffective both in the short and long runs.
4) Brazil’s 1999 crisis was relatively short lived because
A) Brazil’s financial institutions had avoided borrowing all together.
B) Brazil’s financial institutions had avoided heavy borrowing in local currency.
C) Brazil’s financial institutions had avoided heavy borrowing in dollars.
D) Brazil’s financial institutions had extended low-interest loans.
E) Brazil’s financial institutions had extended high-interest loans.
5) What does it mean for a loan to be in default?
A) when the borrower of the a loan fails to repay on schedule according to a loan contract, without the agreement of the lender
B) when the borrower of a loan fails to repay on schedule according to a loan contract, with the agreement of the lender
C) when the lender of a loan fails to supplies the full amount of a loan to the borrower
D) when the lender of a loan supplies the full amount of a loan to a borrower without any promise of being repaid
E) when the lender of a loan fails to offer the promised sum
6) A trend that has been reinforced by many developing countries is privatization. Privatization refers to
A) purchasing large companies and turning them into state-owned enterprises.
B) investing government money in large, privately-owned companies.
C) exchanging bonds for shares in state-owned enterprises.
D) selling large state-owned enterprises to private owners in the financial sector.
E) selling large state-owned enterprises to private owners in key areas such as electricity, telecommunications, or petroleum.
7) A considerable advantage that richer countries have over poorer ones is exemplified by the fact that
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.
8) 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?
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
9) With which country did the Debt Crisis of the early 1980s begin?
A) France
B) Mexico
C) Argentina
D) Japan
E) Germany
10) In 1991, Argentina established a radical institutional reform after experiencing a decade marked by financial instability. This program was called the new Convertibility Law. What did this law do?
A) made Argentina’s currency fully convertible into Eurocurrency at a fixed rate
B) required that the monetary base be backed completely by U.S. dollars
C) placed limits on exports of commodities
D) made Argentina’s currency fully convertible into U.S. dollars at a fixed rate and required that the monetary base be backed completely by gold or foreign currency
E) restricted risky international trade activity
