Question 1

The most common type of macroeconomic imbalance is overly expansionary fiscal policies that create large government budget deficits,often financed by a high growth rate of the money supply.

Accepted Answer

A) True 
 B)False

Question 2

What are the benefits of capital mobility?

Accepted Answer

The benefits include that inve...

Question 3

The main policy advice given by the IMF to East Asian countries facing the financial crises of 1997/1998 was

Accepted Answer

A)  raising their domestic interest rates to stabilize the collapsing currencies.
B)  using their monetary and fiscal policies alone.
C)  use capital controls.
D)  adopting a flexible exchange rate system.
E)  adopting a fixed exchange rate system.F) B) and E)
G) A) and E)

Question 4

A large and growing current account deficit can be an indicator of a potential crisis.

Accepted Answer

A) True 
 B)False

Question 5

Current research suggests that countries that adopt a pegged exchange rate may be more vulnerable to an exchange rate crisis.

Accepted Answer

A) True 
 B)False

Question 6

Exchange rates and banking systems are often the variables through which the contagion effects of a crisis are spread from one country to another.

Accepted Answer

A) True 
 B)False  True

Question 7

All of the following involve a moral hazard problem except

Accepted Answer

A)  an individual driving carelessly after buying a comprehensive insurance policy for a Ford Pinto.
B)  the IMF bailing Mexico out of a financial crisis,with promises to do the same for other nations that might face financial problems.
C)  making regular visits to your doctor because you know that you have full healthcare coverage.
D)  the requirement of banking institutions that owners invest a substantial portion of their own capital in their bank.
E)  membership in FDIC (Federal Deposit Insurance Corporation) by your local bank.F) D) and E)
G) C) and E)

Question 8

Which one of the following countries refused to accept the IMF conditions during the East Asian financial crisis?

Accepted Answer

A)  South Korea
B)  Indonesia
C)  Malaysia
D)  Thailand
E)  SingaporeF) B) and E)
G) A) and B)

Question 9

Financial capital is highly volatile,and technological advances have reinforced this volatility.

Accepted Answer

A) True 
 B)False

Question 10

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 regulationE) All of the above
F) A) and B) A

Question 11

A flexible exchange rate system guarantees a country will not experience an exchange rate crisis.

Accepted Answer

A) True 
 B)False  False

Question 12

An exchange rate crisis is caused by

Accepted Answer

A)  a sudden and an unexpected collapse in the value of a nation's currency.
B)  the inability of the IMF to predict the immediate collapse of the currency of a country.
C)  the adoption of a flexible exchange rate system by a country or group of countries.
D)  the adoption of a fixed exchange rate system by a country or group of countries.
E)  Both C and D are correct.F) A) and B)
G) C) and D)

Question 13

Which of the following was NOT one of the causes of the Asian financial crises of 1997 and 1998?

Accepted Answer

A)  A current account deficit and financial account surpluses
B)  The use of exports as an engine of economic growth by the countries involved
C)  China's 1994 devaluation of its fixed exchange rate
D)  The appreciation of the U.S.dollar and depreciation of the Japanese yen
E)  Crony capitalismF) B) and C)
G) A) and E)

Question 14

Unlike a banking crisis,an exchange rate crisis rarely results in a deep recession.

Accepted Answer

A) True 
 B)False

Question 15

All of the following are symptoms of definite and indefinite macroeconomic imbalances except

Accepted Answer

A)  large budget deficits.
B)  an overvalued currency.
C)  a current account deficit.
D)  the discovery of emerging markets by financial investors who want to diversify their portfolios.
E)  inflationary pressures.F) B) and C)
G) A) and D)

Question 16

If the banking sector borrows internationally and lends locally,how does this intensify a financial crisis?

Accepted Answer

The borrowed funds have to be ...

Question 17

The international institution that serves as a lender of last resort is called the

Accepted Answer

A)  IBRD.
B)  WTO.
C)  IMF.
D)  World Bank.
E)  GATT.F) B) and C)
G) A) and E)

Question 18

A fixed exchange rate system crisis may be accompanied or followed by

Accepted Answer

A)  unexpected gains of international reserves.
B)  revaluation of a currency.
C)  devaluation of a currency.
D)  gains in comparative advantage.
E)  deflationary pressures within the country.F) C) and E)
G) None of the above

Question 19

Deficits financed by borrowed money lead to inflation,and in a fixed or crawling peg exchange rate system,this leads to the real exchange rate being undervalued.

Accepted Answer

A) True 
 B)False

Question 20

Small devaluations are usually sufficient to stem capital flight.

Accepted Answer

A) True 
 B)False

Exam 12: International Financial Crises

The most common type of macroeconomic imbalance is overly expansionary fiscal policies that create large government budget deficits,often financed by a high growth rate of the money supply.

Correct AnswerverifiedShow Answer

What are the benefits of capital mobility?

Correct AnswerverifiedThe benefits include that inve...View AnswerShow Answer

The main policy advice given by the IMF to East Asian countries facing the financial crises of 1997/1998 was

Correct AnswerverifiedShow Answer

A large and growing current account deficit can be an indicator of a potential crisis.

Correct AnswerverifiedShow Answer

Current research suggests that countries that adopt a pegged exchange rate may be more vulnerable to an exchange rate crisis.

Correct AnswerverifiedShow Answer

Exchange rates and banking systems are often the variables through which the contagion effects of a crisis are spread from one country to another.

Correct AnswerverifiedTrue

All of the following involve a moral hazard problem except

Correct AnswerverifiedShow Answer

Which one of the following countries refused to accept the IMF conditions during the East Asian financial crisis?

Correct AnswerverifiedShow Answer

Financial capital is highly volatile,and technological advances have reinforced this volatility.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

A flexible exchange rate system guarantees a country will not experience an exchange rate crisis.

Correct AnswerverifiedFalse

An exchange rate crisis is caused by

Correct AnswerverifiedShow Answer

Which of the following was NOT one of the causes of the Asian financial crises of 1997 and 1998?

Correct AnswerverifiedShow Answer

Unlike a banking crisis,an exchange rate crisis rarely results in a deep recession.

Correct AnswerverifiedShow Answer

All of the following are symptoms of definite and indefinite macroeconomic imbalances except

Correct AnswerverifiedShow Answer

If the banking sector borrows internationally and lends locally,how does this intensify a financial crisis?

Correct AnswerverifiedThe borrowed funds have to be ...View AnswerShow Answer

The international institution that serves as a lender of last resort is called the

Correct AnswerverifiedShow Answer

A fixed exchange rate system crisis may be accompanied or followed by

Correct AnswerverifiedShow Answer

Deficits financed by borrowed money lead to inflation,and in a fixed or crawling peg exchange rate system,this leads to the real exchange rate being undervalued.

Correct AnswerverifiedShow Answer

Small devaluations are usually sufficient to stem capital flight.

Correct AnswerverifiedShow Answer

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The benefits include that inve...
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True

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A

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False

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The borrowed funds have to be ...
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