Emerging Markets Frequently Get Hit by the Following Two Effects

question 73

Multiple Choice

Emerging markets frequently get hit by the following two effects when they have a financial crisis:

• A)a decrease in the real interest rate and in the real exchange rate.
• B)capital flight and a falling real interest rate.
• C)an increase in the real interest rate and a depreciation of the real exchange rate.
• D)a surge in net capital inflows and rising inflation.

---

Definitions:

Initial Investment

The amount of capital put into a project or business at the beginning, often used in capital budgeting to analyze potential returns.

Life Of Equipment

The estimated duration for which equipment can be expected to operate effectively and be used productively by a business.

Annual Cash Inflow

The total amount of money received by a company over a year, from operations, investments, and financing activities.

Discount Rate

The discount rate applied in the discounted cash flow method to calculate the current value of anticipated cash flows.