Question 1

Developing societies import foreign capital because it makes it possible to finance more investment at a lower cost than relying solely on their domestic savings.

Accepted Answer

Developing societies often lack the necessary domestic savings to finance all of their desired investment projects. By importing foreign capital, these societies can access additional funds at potentially lower interest rates than would be available domestically.

Question 2

Foreign aid to sub-Saharan Africa is about the same as to other regions in the developing world.

Accepted Answer

Sub-Saharan Africa often receives a higher amount of foreign aid compared to other regions in the developing world, reflecting its greater needs and challenges, including poverty, health issues, and infrastructure development.

Question 3

Political instability is one of the most important reasons why sub-Saharan Africa attracts so little private capital.

Accepted Answer

Political instability creates a high level of risk for private investors and thus discourages them from investing in sub-Saharan Africa, resulting in low levels of private capital investment in the region.

Question 4

The Latin American debt crisis was declared over in the mid-1990s.According to Oatley,in hindsight,it is clear that

Accepted Answer

The Latin American debt crisis is viewed more as an economic development crisis than a financial one, emphasizing the structural economic issues that contributed to the crisis rather than just financial mismanagement or market fluctuations.

Question 5

Structural adjustment programs were controversial because they sought to reshape the indebted economies by increasing the government's role and reducing that of the market.

Accepted Answer

Structural adjustment programs sought to reduce the government's role and increase that of the market in indebted economies, not the other way around.

Question 6

Why has sub-Saharan Africa failed to attract so little private capital and subsequently had to rely more on foreign aid than other developing regions?

Accepted Answer

The answer of Why has sub-Saharan Africa failed to attract...

Question 7

Why do developing countries continue to draw on foreign capital in spite of its apparent political dangers?

Accepted Answer

The answer of Why do developing countries continue to draw...

Question 8

Describe and explain why and how debt service ratios rendered Latin American countries vulnerable to international economic shocks in the 1980s.

Accepted Answer

The answer of Describe and explain why and how debt...

Question 9

Which of the following domestic interest groups in developing countries stood to lose the least from stabilization and structural adjustment?

Accepted Answer

Rural farmers stood to lose the least from stabilization and structural adjustment as they were generally not dependent on government subsidies and were able to benefit from increased competitiveness and access to markets due to liberalization policies. Import-competing firms, state-owned enterprises, workers in the urbanized non-traded goods sector, and public sector employees are all more heavily reliant on government support, protectionism, and subsidies, which were typically reduced or eliminated under stabilization and structural adjustment programs.

Question 10

Explain how and why the expansion of foreign aid programs in the 1960s was influenced by decolonialization and American desires to contain Soviet Communism.

Accepted Answer

The answer of Explain how and why the expansion of...

Question 11

Rising American interest rates in the early 1980s were transferred directly to Latin America because two-thirds of Latin American debt carried variable interest rates.

Accepted Answer

This statement is true. Because the majority of Latin American debt carried variable interest rates, any increase in American interest rates would be directly transferred to Latin America. This led to a debt crisis in many Latin American countries in the 1980s.

Question 12

According to Oatley,which of the following was not a reason that induced developing governments to embark on economic reform in the 1990s?

Accepted Answer

The answer of According to Oatley,which of the following<u> was...

Question 13

Throughout the postwar period,private capital flows have been larger than foreign aid flows.

Accepted Answer

Private capital flows, which include foreign direct investment, portfolio investment, and loans from commercial banks, have consistently been larger than foreign aid flows in the postwar period. According to World Bank data, private capital flows to developing countries were $328 billion in 2019, while foreign aid flows totaled $152 billion in the same year.

Question 14

Explain and discuss how each phase of the boom-and-bust cycle has characterized the history of capital flows from the advanced industrial countries to the developing world.

Accepted Answer

The answer of Explain and discuss how each phase of...

Question 15

Developing countries continue to draw on foreign capital because they do not understand that the political dangers outweigh the economic benefits.

Accepted Answer

This statement is not entirely accurate. Developing countries may understand that there are political dangers associated with foreign capital, but they may prioritize the short-term economic benefits over the potential long-term risks. Additionally, some developing countries may not have alternative sources of capital to fund their economic growth and development.

Question 16

At the center of the difficult relationship between developing countries and the international financial system is a seemingly inexorable boom-and-bust cycle.

Accepted Answer

The difficult relationship between developing countries and the international financial system is often characterized by a boom-and-bust cycle, where periods of economic growth and prosperity are followed by sudden downturns and crises. This pattern has been observed in many developing countries, often due to factors such as external debt, currency fluctuations, and commodity price volatility. The cycle perpetuates many of the challenges faced by developing countries in achieving sustainable economic development and reducing poverty.

Question 17

During the 1980s,the most accurate estimate of Argentina's average inflation rate per year was over

Accepted Answer

Argentina's average inflation rate per year during the 1980s was over 700%.

Question 18

The Cold War did not contribute to the tremendous growth of foreign aid programs during the 1960s.

Accepted Answer

The Cold War did contribute to the growth of foreign aid programs during the 1960s as the United States and the Soviet Union competed for influence in developing countries through aid and development projects. This period saw the establishment of major aid programs such as the Alliance for Progress and the Peace Corps.

Question 19

According to Oatley,governments in debtor countries never threatened collective default primarily because

Accepted Answer

Oatley points out that creditors would offer "special deals" to individual governments as a strategy to prevent them from joining a collective default, thus undermining the potential for a unified default movement among debtor countries.

Question 20

If all Latin American debtor governments had defaulted in the 1980s,most of the capital of the largest American commercial banks would have been eliminated.

Accepted Answer

The statement is true. The Latin American debt crisis of the 1980s had a significant impact on the largest American commercial banks, which had lent large sums of money to the debtor governments. If all of the debtor governments had defaulted, the banks would have suffered substantial losses and many may have been bankrupted.

Quiz 14: Developing Countries and International Finance I: the Latin American Debt Crisis