Which of the Following Economic Lessons Should We Take from Developing

question 81

Multiple Choice

Which of the following economic lessons should we take from developing country crises in Latin America (and elsewhere) ?

• A)Only that it is important to choose the right exchange rate regime.
• B)Only that banking is of central importance in any government.
• C)The order in which reform measures are implemented are irrelevant.
• D)It is important to choose the right exchange rate regime and banking is of central importance in any government.
• E)The order in which reform measures are implemented are irrelevant and banking is of central importance in any government.

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Definitions:

Gold Standard

A historical system of fixed exchange rates in which nations defined their currency in terms of gold, maintained a fixed relationship between their stock of gold and their money supplies, and allowed gold to be freely exported and imported.

Current Account

The section of a nation’s international balance of payments that records its exports and imports of goods and services, its net investment income, and its net transfers.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a specific period.

Devaluation

Government policy that lowers the nation’s exchange rate so that its currency is worth less than it had been relative to foreign currencies.