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© 2014 Pearson Canada Inc.#
An international lender of last resort creates a serious moral hazard problem because
____ and other ____ of banking institutions expect that they will be protected if a crisis
occurs.
A) depositors; debtors
B) depositors; creditors
C) borrowers; debtors
D) borrowers; creditors
Answer: B
Diff: 1 Type: MC Page Ref: 510
Skill: Recall
Objective List: 20.4 Depict the role of the IMF as an international lender of last resort
Critics of the IMF contend that its lending in the Mexican crisis, which was used to bail out
foreign ____, set the stage for the ____ crisis because these ____ expected to be
bailed out if things went wrong.
A) lenders; East Asian; borrowers
B) lenders; East Asian; lenders
C) borrowers; Russian; borrowers
D) borrowers; Russian; lenders
Answer: B
Diff: 1 Type: MC Page Ref: 510
Skill: Applied
Objective List: 20.4 Depict the role of the IMF as an international lender of last resort
Critics of the IMF contend that its lending in the ____ crisis, which was used to bail out
foreign lenders, set the stage for the ____ crisis because these lenders expected to be bailed
out if things went wrong and thus provided funds that were used to fuel excessive risk taking.
A) Russian; Mexican
B) Russian; East Asian
C) Mexican; Russian
D) Mexican; East Asian
Answer: D
Diff: 1 Type: MC Page Ref: 510
Skill: Applied
Objective List: 20.4 Depict the role of the IMF as an international lender of last resort
An advantage of an international lender of last resort is its ability to prevent ____, in
which a successful speculative attack on one currency leads to attacks on others.
A) contagion
B) adverse selection
C) moral hazard
D) currency virus
Answer: A
Diff: 1 Type: MC Page Ref: 510
Skill: Recall
Objective List: 20.4 Depict the role of the IMF as an international lender of last resort