After a Speculative Attack Has Been Successful, and the Country

question 48

Multiple Choice

After a speculative attack has been successful, and the country is forced to devalue its currency, it is common to see many local business firms driven to bankruptcy.This most commonly occurs because _____.

• A)nobody ever wants to invest in a country that just suffered a devaluation
• B)many local firms had foreign loans (denominated in, say, dollars), and they cannot repay them at the new exchange rate
• C)the WTO forces troubled firms to show profits or make way for new, more efficient firms
• D)local firms cannot compete with their foreign competitors at the new prices after the devaluation
• E)many local firms do not know how to deal with the complicated financial operations involved in a speculative attack

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Definitions:

Hyperbola

A type of conic section that appears as two symmetrical curves, defined mathematically as the set of points where the difference of the distances to two foci is constant.

Standard Form

A way to write numbers using the digits 0-9, where each digit is given a place value, or for equations, a specific arrangement, such as \(Ax + By = C\) for linear equations.

Method of Substitution

A technique used to solve systems of equations where one equation is solved for one variable in terms of the others, and then substituted into another equation.

System of Equations

A collection of two or more equations with the same set of unknowns.