The East Asian model's approach to interest rates has been
a. to keep interest rates well below market levels
b. to keep interest rates above market levels
c. to allow the market to determine interest rates
d. to allocate investment funds entirely through government, and not charge any interest
e. none of the above
Question 2 - When the external balance relationship between government spending and money stock is positive, then the
A) internal balance between them must be negative.
B) internal balance between them might be negative or positive.
C) internal balance between them must also be positive.
D) internal balance between them would not exist.
Question 3 - Suppose that a borrower has a near-perfect credit history before the bank loans him some money. Shortly after the loan has been made, he loses his job and spends money recklessly. This describes the problem known as
A) moral hazard.
B) adverse selection.
C) risk aversion.
D) asymmetric information.
Question 4 - During 19902003, as a percentage of total resource flows to developing countries, the share of official flows has
(a) remained relatively constant.
(b) increased by a relatively small percentage.
(c) increased by a relatively large percentage.
(d) decreased by a relatively small percentage.
(e) decreased by a relatively large percentage.
Question 5 - To derive the external balance relationship under high capital mobility and floating exchange rates, an increase in government spending must be followed by
A) an increase in money stock to restore the balance of payments equilibrium.
B) a decrease in money stock to restore the balance of payments equilibrium.
C) a depreciation of the currency to restore the balance of payment equilibrium.
D) a decrease in investment spending to restore the balance of payments equilibrium.
Question 6 - A major cause of environmental degradation in developing countries is
(a) debt for nature swaps.
(b) poverty.
(c) a lack of public transportation.
(d) land reform.
Question 7 - Financial intermediation is necessary because of
A) asymmetric information.
B) adverse selection problems.
C) the risk of moral hazard.
D) all of the above.
Quick Reply
