Describe how a sudden stop leads to a financial crisis
What will be an ideal response?
A sudden shit from positive to negative flows from one year to the next in the foreign owned reserve assets in the nation and loans to domestic firms may cause the financial account to become negative. This means there are no inflows to finance a current account deficit, so it must move from a negative balance to a positive balance, usually by a sudden reduction in imports and an eventual increase in exports. This shift in trade relations may cause a deep recession.
You might also like to view...
According to the production possibilities model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?
A) The country's total production will fall. B) The production possibilities frontier will shift inward in the future. C) Fewer goods will be produced for consumption today. D) Future economic growth will decline.
If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
a. it increases revenue more than costs or reduces costs more than revenue b. it decreases some costs more than it increases others (assuming revenues remain constant) c. it increases some revenues more than it decreases others (assuming costs remain constant) d. all of the above e. b and c only
One big difference between tariffs and quotas is that tariffs:
A. raise the price of a good while quotas lower it. B. generate tax revenues while quotas do not. C. stimulate international trade while quotas inhibit it. D. hurt domestic producers while quotas help them.
Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market
What will be an ideal response?