M&B3 3rd Edition by Dean Croushore

Exercise 9

Suppose that you were a politician in a small country that owed millions of dollars (in dollardenominated loans) to U.S. banks that had lent your country money for investment over the past decade. Most of the investments failed because they went to political cronies rather than to legitimate business fi rms. Now foreign investors are getting nervous and starting to pull their money out, causing your country's exchange rate to depreciate. What actions should you consider taking to save your country's economy Will it help to pass a law forbidding foreign investment