Question 1

Consider the following hypothetical data for a developing country.
  
Does this country have a debt crisis? What additional pieces of quantitative or qualitative evidence?(if any) would help you to decide?

Accepted Answer

Various answers are plausible and this will depend on lecture coverage. Close attention to investment growth should be found in students' answers.

Question 2

About how much debt is held by the developing world (as a whole)? Which countries hold the most debt? Are these the countries where the debt burden is the greatest?

Accepted Answer

The debt burden is greater in Africa than in Latin America, as measured by debt in relation to GNP. Information on total LDC debt is provided in and information for specific nations in.

Question 3

Provide a definition of the current account, the capital account, and the cash account. What is the relationship between the three accounts?

Accepted Answer

Discussed in the chapter.

Question 4

How did the Mexican debt crisis of the early 1980s come about? How has the Mexican economy coped during the past 20 years, in the aftermath of the debt crisis? What has been the legacy of the debt crisis for the Mexican economy?

Accepted Answer

The answer of How did the Mexican debt crisis of...

Question 5

Explain how international trade and trade policy helped South Korea transform itself from an underdeveloped country to a high income country in the space of a single generation. You might begin by discussing South Korea's trade strategy. Why do you think international trade is of such vital importance to South Korea?

Accepted Answer

The answer of Explain how international trade and trade policy...

Question 6

Outline the elements of an IMF stabilization package. Explain the mechanism by which it is?expected to help a balance of payments deficit. How successful have these packages been? ?Explain your answer.

Accepted Answer

The answer of Outline the elements of an IMF stabilization...

Question 7

Discuss the options for financing a balance of payments deficit.

Accepted Answer

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Question 8

What kinds of domestic policies, short of significant debt reduction, can be followed to alleviate a debt crisis? How effective have these policies been?

Accepted Answer

The answer of What kinds of domestic policies, short of...

Question 9

The flow of private foreign investment and grants and loans is included in a country's

Accepted Answer

Private foreign investment, grants, and loans are classified as capital flows, which are recorded in a country's capital account in the balance of payments. The current account, on the other hand, records transactions related to the import and export of goods and services, as well as unilateral transfers such as aid and remittances. The cash account is not a standard component of the balance of payments.

Question 10

An IMF official was quoted as acknowledging that the Fund's stabilization packages have often led to adjustment without growth. However, he said, "the Fund is a firefighter, not a carpenter, and you cannot expect the firefighter to rebuild the house as well as put out the fire." Provide a balanced evaluation of this statement.

Accepted Answer

The answer of An IMF official was quoted as acknowledging...

Question 11

What is meant by the term odious debt?

Accepted Answer

The answer of What is meant by the term odious...

Question 12

Explain what is meant by capital flight. How would you distinguish capital flight from the normal desire of investors to diversify their portfolios by investing abroad?

Accepted Answer

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Question 13

Why may the debt crisis be only "sleeping," rather than "dead?"

Accepted Answer

The answer of Why may the debt crisis be only...

Question 14

What is meant by petrodollar recycling? Explain the mechanism by which this phenomenon occurred. What were the consequences of this phenomenon for developing countries?

Accepted Answer

The answer of What is meant by petrodollar recycling? Explain...

Question 15

Outline the principal sources of the debt crisis.

Accepted Answer

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Question 16

Explain how a devaluation is supposed to reduce the external debt of a developing country. Give two reasons why a devaluation may be less effective than expected.

Accepted Answer

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Question 17

Consider debt-equity swaps as an approach to debt reduction. Briefly describe how this works. State two arguments in favor of significant reliance on this strategy and two arguments against.

Accepted Answer

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Question 18

What economic variables would you need to consider in order to distinguish between a developing country with a short-term balance of payments problem and one in a debt crisis? Explain what data you would need to look at and why.

Accepted Answer

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Question 19

Provide a concise statement on the relationship between the debt crisis and: (a) foreign direct investment, (b) trade liberalization, (c) absolute poverty, and (d) investment levels.

Accepted Answer

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Question 20

Debt service payments appear in

Accepted Answer

The answer of Debt service payments appear in
...

Quiz 13: Balance of Payments, Developing-Country Debt, and the Macroeconomic Stabilization Controversy

Consider the following hypothetical data for a developing country. Does this country have a debt crisis? What additional pieces of quantitative or qualitative evidence?(if any) would help you to decide?