Question 1

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

Accepted Answer

The answer of Which of the following did NOT contribute...

Question 2

When the Russian Ruble reached the limits of the bands about its managed float targets (Ru5.70/$ to Ru6.35/$) in 1997, the Russian government would intervene in the markets to stabilize the Ruble. If the exchange rate approached Ru5.70/$ the government would ________ Rubles using foreign exchange and gold, or if the exchange rate approached Ru6.35/$ they would ________ Rubles.

Accepted Answer

The answer of When the Russian Ruble reached the limits...

Question 3

It is safe to say that the Russian transition from a communist economy to a capitalist economy has been smooth for the Russian people.

Accepted Answer

The Russian transition from a communist economy to a capitalist economy has not been smooth for the Russian people. The transition was accompanied by economic instability, social unrest, and a sharp decline in living standards for many Russians. While some have benefited from the transition, a large portion of the population has experienced economic hardship and social dislocation.

Question 4

Corporate socialism in the Asian markets could be contributed in part

Accepted Answer

All of the above factors have contributed to the prevalence of corporate socialism in Asian markets. The stability of post-WWII capitalism in these markets allowed for long-term planning and investment, while the belief that governments would not allow companies to fail provided a safety net. Additionally, the practice of lifetime employment at many corporations allowed for more risk-taking and innovation without fear of losing one's job.

Question 5

In the years immediately preceding 1998 the Russian Ruble operated under a ________ type of exchange rate regime.

Accepted Answer

The Russian Ruble operated under a managed floating exchange rate regime in the years immediately preceding 1998. This means that the central bank intervened in the foreign exchange market to influence the value of the ruble, but did not fix it at a specific rate.

Question 6

The "tequila effect" is a slang term used to describe a form of financial panic called

Accepted Answer

The "tequila effect" is a form of financial panic where a crisis in one country spills over to other countries through financial contagion. This term was coined after the 1994 Mexican peso crisis, where a devaluation of the peso caused a panic in the financial markets of other emerging economies in Latin America. Therefore, the best choice is D, contagion.

Question 7

A currency board is

Accepted Answer

A currency board is a strict monetary system where the central bank's operations are fully backed by foreign currency reserves. Therefore, it is a structure that limits the growth of the money supply and ensures conservative and prudent financial management. In addition, a currency board eliminates the power of politicians to exercise judgment and relies on an automatic and unbendable rule.

Question 8

Prior to July 2, 1997, the Thai government

Accepted Answer

Prior to July 2, 1997, the Thai government fixed the Bhat's value against major currencies, especially the U.S. dollar.

Question 9

The Asian economic Crisis was

Accepted Answer

The Asian economic crisis was rooted in structural deficiencies of the fast growing Asian economies. These included overinvestment, corruption, cronyism, and poor financial regulation, which eventually led to unsustainable levels of debt and weakened the banking systems of these economies. While factors such as hedge fund speculation and capital controls played a role, they were not the direct cause of the crisis. The crisis was also not a typical transition of net importer to net exporter countries, as it was largely driven by internal factors rather than external shifts in trade balances.

Question 10

The authors did not identify which of the following as a root of the Asian currency crisis?

Accepted Answer

The authors did not identify the rate of inflation in the United States as a root cause of the Asian currency crisis. The collapse of some Asian currencies, corporate socialism, and banking stability and management were all discussed as contributing factors.

Question 11

The Asian Currency crisis appeared to begin in

Accepted Answer

The Asian Currency Crisis started in Thailand in 1997, then spread to other nearby Asian countries such as Indonesia, Malaysia, South Korea, and the Philippines. Japan was also impacted by the crisis, but it did not start there. Taiwan was not one of the countries affected by this crisis.

Question 12

The stability of the Russian Ruble in the 1990s (until the Russian debt crisis) was considered an observable success of the Yeltsin administration.

Accepted Answer

The answer of The stability of the Russian Ruble in...

Question 13

________ is the alteration of economic or financial fundamentals which are thought to be drivers of capital to flow in and out of specific currencies.

Accepted Answer

Indirect intervention is the alteration of economic or financial fundamentals, such as interest rates, inflation, or government policies, in order to influence the flow of capital in and out of specific currencies. This is in contrast to direct intervention, which involves a central bank actively buying or selling a currency to influence its value, and proportional intervention, which involves adjusting the exchange rate within a predetermined range. "Hopeless intervention" is not a commonly used term in the context of currency intervention.

Question 14

________ is the official Chinese currency.

Accepted Answer

Renminbi (also known as Yuan) is the official currency of China. Baht is the currency of Thailand, Won is the currency of South Korea, and Ringgit is the currency of Malaysia.

Question 15

When country Central banks work together to intervene and push a particular currency's value in
a desired direction, this is known as coordinated intervention.

Accepted Answer

Coordinated intervention is when multiple central banks collaborate to manipulate the value of a currency in a particular direction. This can be done to stabilize the currency, prevent excessive volatility or to gain a competitive advantage in trade.

Question 16

After the Russian government (in August 1998) allowed the Ruble to move outside its official trading range of between Ru5.70/$-Ru6.35/$, the value of the Ruble eventually ________ to around ________ by May 1999.

Accepted Answer

The question states that after the Russian government allowed the Ruble to move outside its official trading range, the value of the Ruble eventually decreased. Therefore, we can eliminate choices A and B. It also states that the value of the Ruble reached a certain level by May 1999. The only choice that matches this is D, which states that the Ruble decreased to around Ru25/$.

Question 17

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

Accepted Answer

All three options- the Asian, Russian, and Argentine crises- were international currency crises that occurred in the 1990s and early 2000s.

Question 18

The Russian crisis of 1998

Accepted Answer

The Russian crisis of 1998 was caused by a culmination of continuing deterioration of economic conditions, including a decline in oil prices, a decrease in foreign investment, and an increase in government debt. It led to a devaluation of the ruble, default on government bonds, and a severe economic recession in Russia. The other options (A, B, and D) are incorrect as they do not accurately reflect the causes or outcomes of the crisis.

Question 19

The authors refer to the practice of many Asian firms being largely controlled by families of groups related to the governing body of the country as

Accepted Answer

The authors are referring to cronyism, which is the practice of giving jobs and other favors to friends and associates, often in politics or business. This is often seen in Asian countries where many firms are controlled by families or groups that are closely related to the government in power.

Question 20

The principle focus of the IMF bailout efforts during the Asian financial crisis was

Accepted Answer

The IMF bailout efforts during the Asian financial crisis were primarily focused on the liquidity of the banking system. The crisis was triggered by the collapse of the Thai baht, which caused widespread banking problems and liquidity shortages throughout the region. The IMF provided financial assistance to these countries in order to help stabilize their banking sectors and restore confidence in their economies. The focus was on restoring liquidity to the banking system, rather than on other objectives such as shareholder wealth or fixed currency exchange rates. The idea of dollarization of Asian currencies was not a major focus of the IMF's efforts during this crisis.

Quiz 8: Foreign Exchange Rate Determination