A financial crisis brought on by volatile capital flows
A) is usually inevitable given underlying conditions.
B) does not happen to countries with strong international positions.
C) is often preceded by capital inflows and an increase in foreign liabilities.
D) is usually the result of high budget deficits.
C
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Loretta agrees to lend Ted $500,000 to buy computers for his consulting firm. They agree to a nominal interest rate of 8%. Both expect the inflation rate to be 2%
(a) Calculate the expected real interest rate. (b) If inflation turns out to be 3% over the life of the loan, what is the real interest rate? Who gains from unexpectedly high inflation, Loretta or Ted? (c) If inflation turns out to be 1% over the life of the loan, what is the real interest rate? Who gains from unexpectedly low inflation, Loretta or Ted?
Happy Cows is a perfectly competitive dairy farm with a 50 percent chance of a high demand of $5 and a 50 percent chance of a low demand of $4. Free Cows is a perfectly competitive dairy farm with a 50 percent chance of a high demand of $6 and a 50 percent chance of a low demand of $3. Which of the following statements is true?
A) All else equal, neither Free Cows nor Happy Cows can benefit from an accurate forecast. B) All else equal, an accurate forecast is more valuable to Happy Cows than Free Cows. C) All else equal, an accurate forecast has the same value to both Free Cows and Happy Cows. D) All else equal, an accurate forecast is more valuable to Free Cows than Happy Cows.
Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is 10 percent. If it accepts a $1,000 cash deposit, then, excluding the $1,000 initial deposit, the banking system can increase the money supply by:
a. $900. b. $910. c. $1,000. d. $9,000. e. $10,000.
Suppose McDonald's puts up five new stores in San Francisco using the exact same floor plan, capital equipment and number of workers, then the long run average cost curve of McDonald's would be ________ and the company experiences ________.
A. horizontal; constant returns to scale B. horizontal; economies of scale C. upward sloping; economies of scale D. horizontal; diseconomies of scale