Economics Final
According to World Bank Report (1993), which of the following characteristics was NOT observed in the High-Performing Asian Economies from 1960-1990?
An increase in income inequality.
According to "The Asian Financial Crisis Ten Years Later" by Yellen (2007), which of the following factors does NOT belong to the "three vulnerabilities" that caused the Asian crisis?
Appreciation of the value of Japanese yen.
In developing countries, why does the rate of natural increase tend to rise sharply in the early stage of development?
As the developing countries become more developed, the death rate falls sharply while the birth rate remains at the same level for some periods of time.
Which of the following statements is NOT true about the "chaebol"?
Chaebols are controlled by outside stockholders and operated by professional corporate management.
Which of the following countries was NOT one of those severely hit by the East Asian financial crisis in 1997? China, Malaysia, Indonesia, South Korea
China
Which of the following countries was NOT one of those severely hit by the East Asian financial crisis in 1997?
China
Which of the following is NOT the root cause of Asian financial crisis?
Chronic trade surplus in Asian economies before the crisis year.
Which of the following characteristic does NOT belong to a country that tends to adopt a fixed exchange rate system?
Closed economy
IMF had proposed the crisis-ridden countries to reduce their domestic absorption. What is the domestic absorption?
Consumption, investment, and government spending
Suppose that Vietnamese government is contemplating on promote both steel and automotive industries. If they are established simultaneously, then both industries will become profitable and benefit the country as a whole (having one industry without the other will not become profitable). Without an explicit government support in both industries, there is little chance that any entrepreneur would invest and thus neither industry will be established. Which of the following industrialization problems does Vietnam face?
Coordination failure.
Assume that Country A and Country B are identical in every aspect, except that the depreciation rate is higher in Country A than in Country B. According to the Solow Model (with no technological growth), in the steady state,
Country A's level of output per worker will be lower than Country B's.
According to "The Asian Financial Crisis Ten Years Later" by Yellen (2007), which of the following factors does NOT belong to the "three vulnerabilities" that caused the Asian crisis?
Crony (buddy) capitalism.
Which of the following exchange rate systems is the least flexible?
Currency board
__________ occurs when a country abolishes its own currency and uses the currency of some other country.
Dollarization
A country's dependency ratio represents:
Economic burden of a country's working population to support children and elders
Which of the following is the central feature of the Bretton Woods system?
Every country fixed its exchange rate to the U.S. dollar
"The Gini coefficient is 0.5 when income is distributed equally with everyone getting the same income." Is this statement true or false? (Write your answer in the provided space.)
False, the higher the number, the higher income inequality is.
Which of the following is NOT correct about the Asian-style capitalism?
Government has ownership in all manufacturing firms.
The international effort that was aimed to develop high-yield varieties of rice, expand irrigation infrastructure, and distribute fertilizers and seeds to farmers is called:
Green Revolution.
Which of the following pairs correctly matches a country with its exchange rate system?
Hong Kong - Currency board
Malaysia's entrepreneurs have no information about whether a hi-tech industry would be profitable or not. No single investor would want to be the first one who invests in this industry. The first investor would have to bear high sunk cost with no guarantee of profitability. Everyone waited for someone to be the first investor so that they can learn about this business plan for free. Without government involvement, no one will invest in this project. The Malaysian government decides to become the first investor itself. The justification for Malaysia's government to intervene in this industry is called _________.
Information externalities.
What is the Green Revolution?
International effort to develop high-yielding varieties of rice
According to Akamatsu's flying-geese (FG) hypothesis, which of the following development pattern represents the inter-regional catching-up pattern of FG formation?
Japan → 4 Tigers → ASEAN 4 → China → Vietnam
Which of the following arises when the knowledge that IMF rescue packages are possible leads to countries being less careful about their international lending practices?
Moral hazard.
Which of the following statements is TRUE? I. Today, no country fixes its currency to gold. II. In the Bretton Woods system, every country's currency was fixed to gold.
Only I
Empirical evidence from Radelet, Sachs, and Lee (1997) finds that:
Openness increases economic growth.
________ explains the relationship between the level of economic development and income inequality. The hypothesis states that, as a country undergoes its economic development, income inequality first increases, and then decreases with further development.
Simon Kuznets' inverted U-shaped curve
Which of the following policies did NOT belong to the South Korea's export push policy?
Tariffs that discourage competing foreign products to enter the country.
Which of the following cases represent an appreciation of the exchange rate value of the U.S. dollar?
The exchange rate goes from 100 yen/$ to 111 yen/$.
What credit-market policy did the Korean government use to promote exports during the 1970s?
The government used low-interest-rate loans as a form of indirect subsidy to exporters
Which of the following arguments for trade protection postures that temporary protection (e.g. tariffs and quotas) is needed for a newly established industry with initially high costs and potential lower costs in the long run?
The infant industry argument.
Suppose the average price of a Big Mac in the United States is $3.50 while in Japan the average price is 400 yen. If the price of a dollar is 100 yen per dollar, the purchasing power parity model of exchange rate determination suggests
The yen is overvalued.
Which of the following is the main function of the International Monetary Fund (IMF)?
To loan reserves to countries that are troubled by economic crisis.
Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $17,000 and sold it to Tyler for $20,000. Later that year, Tyler sold the car to Camille for $15,000. By how much did these transactions contribute to U.S. GDP for the year? Write your answer in the provided space.)
Tyler's purchase of 20k is counted towards the GDP.
Which of the following will shift the demand curve for the Japanese yen to the right?
U.S. demand for products imported from Japan increases significantly as Japanese culture becomes more popular in the U.S.
. A Chaebol refers to:
a large business conglomerate, typically owned by a single family, operated with substantial government assistance
Thailand, Indonesia, and Malaysia produce 90% of world's natural rubber. They have organized the International Rubber Consortium Limited to coordinate their supply and exporting decisions to maximize joint profits. This type of organization is called a
cartel.
Initial conditions in the year before the crisis in Thailand, Indonesia, Malaysia, the Philippines, and Korea in 1997 indicate that I. capital inflows/GDP were very low. II. nonperforming bank loan ratios were high. III. current account deficits were high. IV. domestic credit market grew fast.
d. II, III and IV only
If the domestic currency is initially undervalued, that is below par, the central bank must intervene to sell the _____ currency by purchasing _____ assets.
domestic; foreign
The High-Performing Asian Economies (HPAEs):
have consistently maintained openness to international trade.
According to the trade flow model of foreign exchange, under flexible exchange rate, an increase in the demand for American products by Japanese households will
increase the supply of yen and cause the price of yen to depreciate.
IMF conditionality refers to
macroeconomic policy changes that government in a borrowing country has to make in order to borrow from IMF.
Prior the Asian currency crisis in 1997, the Asian banks and financial institutions had engaged in borrowing a large amount of short-term debt denominated in dollars (from international banks) and lending a large amount of long-term loans denominated in local currencies (to local businesses). This behavior had led to insolvency and bank failure after the Asian currencies were forced to depreciate. This incident is referred as:
maturity mismatch.
IMF conditionality refers to
policy changes that government in a borrowing country has to make in order to borrow from IMF.
Before the Asian Financial Crisis in 1997, Thailand pegged its currency with the US dollar. During that time, the Thai baht had become overvalued. To maintain a fixed exchange rate, the central bank had to intervene by
purchase Thai baht, meaning that it loses dollar reserves.
When the domestic currency is initially overvalued in a fixed exchange rate regime, the central bank must
purchase domestic currency, meaning that it loses international reserves.
Suppose that Thai government commits to maintain stable price of rice. If severe drought has decreased the supply of rice, the price of rice would ________. In order to keep the price at its original level, the government could ____________.
rise; sell rice from the buffer stock to meet excess demand for rice.
Consider the market for Chinese currency (yuan). Suppose that the initial equilibrium exchange rate was $0.125 per one yuan. Then assume that American consumers like Chinese products more than before. If China's central bank wants to peg the exchange rate at its initial level ($0.125 per yuan), the central bank will have to
sell yuan and buy dollar.
According to the Solow model, persistently rising standards of living can only be explained by:
technological progress.
If the French demand for American exports rises, then
the dollar should appreciate relative to the euro.
In the Solow growth model with population growth (n), the capital accumulation equation is equal to:
∆k=sy-(d+n)k
Which of the following are likely to lead to international financial crises?
-Waves of overlending and overborrowing -Exogenous international shocks -Exchange rate risk and large international short-term lending.
Your father tells you he earned $2.00 per hour when he was 16 in 1969; you remember making $10.00 per hour in 2003. Given that the CPI was 36.7 in 1969 and 184.0 in 2003, how does your father's 1969 wage (measured in 2003 dollars) compare with your wage in 2003?
The real wages of you and your father were about equal.
"Import substitution" refers to:
government policies which aim at replacing imports of foreign products with domestic production of the same goods.
Suppose the price of a Big Mac is 36 Pesos in Mexico City and 3 US dollars in New York. In the foreign exchange market, one dollar is traded for 10 Mexican Pesos. Compared to the PPP - implied exchange rate according the Law of One Price theory, the peso is
20% overvalued relative to the dollar
According to the World Bank (2002), there are 690 million people in Asia are in "absolute poverty." What does the absolute poverty mean?
The level of income that is less than $1.25 per day.
Which of the following is "chaebol"?
LG Group
The Solow residual is:
The growth rate of total factor productivity
The 1997 Asian crisis first struck in:
Thailand.
____________ creates Special Drawing Rights.
The International Monetary Fund.
Which of the following statements is correct about the SDR?
The SDR is used as international reserve assets between central banks.
