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Recall the Application About the Causes of the Argentinean Financial

question 133

Multiple Choice

Recall the Application about the causes of the Argentinean financial crisis to answer the following question(s) . During the late 1980s, Argentina suffered from hyperinflation. As part of its financial reforms, Argentina pegged its currency to the U.S. dollar, making pesos "convertible" into dollars. The financial and other institutional reforms worked well in the early 1990s, but then problems developed. As the dollar appreciated sharply on world markets after 1995, Argentina began to suffer from a large trade deficit because its currency was pegged to the dollar. Then in 1999, Brazil devalued its currency, putting additional pressure on neighboring Argentina. Eventually, Argentina was forced to default on its international debt in 2002 and freeze bank accounts, and a severe depression ensued.
-According to this Application, because Argentina pegged its currency to the U.S. dollar, the appreciation of the dollar caused a large trade deficit in Argentina. This trade deficit meant that

Definitions:

Accrual Accounting

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash transactions happen.

Equity Method

An accounting technique used to assess the earnings attributed to a company's investment in another company, reflecting its share of the investee's profits or losses.

Fair Value Method

An accounting approach where assets and liabilities are assessed and reported at their current market values, rather than their historical cost, reflecting their true economic worth.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the investee's profits and losses.