Exam 20: Capital Flows and the Developing Countries

A rising debt/export ratio is never associated with an exchange rate shock.

Which of the following would not usually be associated with an exchange rate shock?

Commercial bank lending to developing countries may be influenced by the actions of the IMF.

Owners of equity normally do not have a right to fixed payments in the form of a stream of income.

Countries that export commodities never intervene in the foreign exchange market.

Which of the following macroeconomic consequences would be associated with an exchange rate shock?

Intervention in the foreign exchange market may be a way for a country to avoid the macroeconomic consequences of an overvalued exchange rate.

How can exchange controls lead to an exchange-rate shock?

A large change in the price of a commodity could cause an exchange rate shock.

An exchange rate shock would tend to cause an increase in the price level.

No country has ever borrowed foreign exchange in order to intervene in the foreign exchange market due to the inability of countries to find commercial banks willing to do this sort of lending.

The IMF has a difficult time enforcing conditionality.

In the 1950s most borrowing from the IMF was done by _____ countries.

A booming economy tends to create:

The debt/export ratio is the ratio of the country's total foreign debt to its exports.

A large drop in the price of a primary commodity would tend to cause a _____ shift in the supply of foreign exchange and a(n) _____ of the currency.

For developing countries, current account _____ tend to couple with financial account _____ .

If the demand for foreign exchange is increasing faster than the supply of foreign exchange is increasing, then the currency needs to depreciate.

Most of the money flowing into the developing countries is in the form of FDI going to middle-income countries.

Explain how the IMF may have created a moral hazard problem in international lending by commercial banks.