Consider debt-equity swaps as an approach to debt reduction. Briefly describe how this works. State two arguments in favor of significant reliance on this strategy and two arguments against
What will be an ideal response?
In favor: may help restore a healthy balance between debt and equity, which in turn provides greater flexibility in repayment of debt, and may help facilitate a privatization program. Against: leads to issue of high-powered currency (so may be inflationary) and in some indebted countries there is limited availability of companies in which foreign investors have an interest in purchasing. If the question is asked after Chapter 15 has been covered, pros and cons of MNCs in development may figure into the answers.
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During the Great Depression, real interest rates
A) rose to unprecedentedly high levels. B) rose only slightly above the long-run trend. C) fell to unprecedentedly low levels. D) fell only slightly below the long-run trend.
If all firms are paying efficiency wages and nominal aggregate demand falls, then between maintaining nominal wages and reducing them firms generally find it more profitable to ________ them, thus ________ the unemployment rate
A) maintain, increasing B) maintain, maintaining C) reduce, increasing D) reduce, maintaining
The scientific method is applicable to studying
a. natural sciences, but not social sciences. b. social sciences, but not natural sciences. c. both natural sciences and social sciences. d. None of the above is correct.
Suppose Carlos has a 60 percent chance of not collecting $100,000 when his rich uncle dies in 10 years. Juanita wants to buy the rights to this possible inheritance from Carlos. How much is the possible inheritance currently worth to Carlos? Assume the interest rate is 9 percent.
A. $25,345. B. $142,042. C. $94,695. D. $16,896.