Exam 20: Capital Flows and the Developing Countries

Moral hazard refers to the tendency of market participants to engage in riskier behavior if they think that they will not have to bear all of the costs of this behavior.

A country's _____ is related to its relative size in the world economy.

Explain what the term IMF conditionality means.

Historically, sovereign lending has been a very safe way for banks to make a profit.

Rising commodity prices could create a macroeconomic environment of a lower price level coupled with a rising real GDP.

An exchange rate shock would have much more serious consequences in a _____ country than in a _____ country.

Suppose that in a country with exchange controls that the demand for foreign exchange is increasing faster than the supply of foreign exchange. In this case a likely result would be:

The Asian crisis of the 1990s originated in Thailand.

Primary commodities account for approximately _____ percent of developing country exports.

If a developing country is a net debtor, this will always lead to an exchange rate shock.

_____ in the foreign exchange market may be a way of avoiding the macroeconomic consequences of an _____ exchange rate.

Describe the potential relationships among intervention, capital flight, and defaults.

The breakdown of an exchange control system could lead to an exchange rate shock.

Borrowing by countries in the form of FDI or investment in stocks is known as:

The situation where exports of a commodity lead to an appreciating exchange rate and a loss of other types of exports is known as:

Exports and imports account for 31 and 29 percent of the collective GDPs of the developing countries.

Commodity price shocks refer to volatility in the price of manufactured products.

Explain the twin deficit problem in terms of S, T, M, G, I, and X.

Which of the following is true of financial contagion?

Which of the following is not associated with an exchange-rate shock linked to intervention in the foreign exchange market?