If a Country Has a Collapsing Currency Due to Large

question 16

Multiple Choice

If a country has a collapsing currency due to large budget deficits financed by monetary expansion,the cure is to

• A)default on sovereign debt and restructure the economy.
• B)peg the currency to something different.
• C)cut the deficit and raise interest rates.
• D)increase the rate of inflation to reduce the real value of government debt.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, including all payments of interest and principal.

Semi-Annually

This term describes events or processes, such as interest payments or calculations, that occur twice a year.

Face Value

The nominal or dollar value printed on a security or a financial instrument, such as a bond or stock.

Annual Coupon Bonds

Bonds that pay interest to the bondholder yearly until maturity, at which point the face value is also repaid.