Economists Eichengreen and Hausmann coined the phrase original sin to describe developing countries inability to borrow in their own currencies. Where do they believe that this inability comes from? What are other beliefs on this topic?
What will be an ideal response?
Eichengreen and Hausmann believe that this inability is a structural problem of poor countries caused by features of the global capital market such as limited additional diversification potential.
For the second part of the question, students discussion may include but is not limited to the following:
(1 ) Bad history of economic policies
(2 ) Problems arise with debt finance in international markets for developing countries
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A nation's growth rate will most likely ________ as it converges to a new, higher balanced growth path
A) speed up B) slow down C) maintain its current pace D) become negative
The effect of a shift in the aggregate demand curve due to an increase in consumer confidence will be:
A. an increase in both prices and output in the short run. B. a decrease in prices only in the long run; output will remain the same. C. a decrease in both prices and output in the short run. D. an increase in output only in the long run; prices will remain the same.
The reduction in aggregate demand caused by deflation:
A. further reduces prices, causing a deflationary spiral. B. will decrease production and increase prices, causing inflation to adjust the price level. C. further reduces prices, causing aggregate supply to shift left back to long-run equilibrium. D. will decrease production and increase prices, causing a deflationary trap.
If net taxes decrease, which of the following would occur?
a. Disposable income decreases, consumption at any income level increases, and the consumption-income line shifts upward. b. Disposable income increases, consumption at any income level increases, and the consumption-income line shifts downward. c. Disposable income increases, consumption at any income level increases, and the consumption-income line shifts upward. d. Disposable income decreases, consumption at any income level decreases, and the consumption-income line shifts downward. e. Disposable income increases, consumption at any income level decreases, and the consumption-income line shifts downward.