What Are the Three Main Lessons on Crisis Learned from Early

question 7

Multiple Choice

What are the three main lessons on crisis learned from early developing countries in Latin America?

• A) choosing the right exchange rate regime, the importance of contagion and the importance of the banking system
• B) choosing the right real rate, the importance of following exchange rates, and keeping prices high to make the most profit
• C) pegging exchange rates with Euros, keeping labor cost and wages low
• D) maintaining money supply, avoiding tariffs, and increasing output
• E) maintaining money supply, avoiding inflation, and increasing production

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Definitions:

Invested Funds

Money allocated by individuals or organizations to stocks, bonds, or other investments with the expectation of earning a return.

Target Structure

An ideal capital structure a company aims to achieve, usually a mix of debt and equity that minimizes cost of capital while maximizing valuation.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted and includes all types of capital such as debt and equity.

Capital Structure

The mix of debt and equity financing used by a firm to fund its operations and growth.