the economics of money, banking, and financial markets

(Sean Pound) #1
626 #
© 2014 Pearson Canada Inc.#



  1. A capital ____ can promote financial instability in an emerging-market country because
    it can lead to a lending boom and excessive risk-taking on the part of banks, which helps trigger
    a ____.
    A) inflow; financial crisis
    B) inflow; currency devaluation
    C) outflow; financial crisis
    D) outflow; currency devaluation
    Answer: A
    Diff: 1 Type: MC Page Ref: 508
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls




  2. A case for capital inflow controls can be made because capital inflows ____.
    A) can cause a lending boom and lead to excessive risk taking
    B) never finance productive investments
    C) always finance productive investments
    D) are less likely to cause financial crises than regulation of banking activities
    Answer: A
    Diff: 1 Type: MC Page Ref: 508 - 509
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls




20.5 The Role of the IMF




  1. In the 1990s, this agency has acted like an international lender of last resort to cope with
    financial instability.
    A) World Bank
    B) European Central Bank
    C) IMF
    D) International Bank for Reconstruction and Development
    Answer: C
    Diff: 1 Type: MC Page Ref: 509
    Skill: Recall
    Objective List: 20.4 Depict the role of the IMF as an international lender of last resort




  2. An international lender of last resort creates a serious ____ problem because depositors
    and other creditors of banking institutions expect that they will be protected if a crisis occurs.
    A) moral hazard
    B) adverse selection
    C) public choice
    D) strategic choice
    Answer: A
    Diff: 1 Type: MC Page Ref: 509
    Skill: Recall
    Objective List: 20.4 Depict the role of the IMF as an international lender of last resort



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