How Did the Tequila Crisis Eventually Turn Out

question 106

Multiple Choice

How did the Tequila Crisis eventually turn out?

• A) Argentina defaulted in May 1997, and its economy has not recovered.
• B) Argentina's central bank reduced its holding of domestic credit to zero and achieved a 100% backing ratio.
• C) Argentina allowed its currency to float.
• D) Argentina increased exports enough so that no lending was needed.

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Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a certain time period.

Perfectly Elastic

Describes a situation where the quantity demanded or supplied of a product responds infinitely to even the smallest change in price.

Inelastic

Refers to a situation where the demand or supply of a good or service is relatively unresponsive to changes in price.

Price Effect

The impact on consumer demand and supply of goods caused by changes in the price of a product or service.