Question

4. A fixed exchange rate system crisis may be accompanied by ___________.

A) losses of international reserves

B) revaluation of a currency

C) falls of domestic interest rates

D) gains in comparative advantage

5. Which of the following involve a moral hazard problem?

A) An individual drove carelessly after buying a comprehensive insurance policy for a car.

B) The IMF promised to bail countries out of financial crises.

C) You make regular visits to your doctor because you know that you have full healthcare

coverage.

D) all of the above.

6. Which of the following is a macroeconomic factor that caused the financial crisis in the Easy

Asian currency crisis of 1997?

A) Global saving and investment imbalances

B) Financial market innovation

C) Deeper levels of integration across financial markets

D) Challenges and failures in financial regulation

Answer 1

Question 4.

Losses of international reserves (A)

Explanation:- When market forces makes fixed exchange rate system unstable. Then to deal with it country needs international currency reserve to stable the situation. However if there is no enough international reserve available then country should devalue their currency.

Question 5.

All of the above ( D)

Explanation:- Moral hazard is the situation where two parties are involved. One party involves in the risk situation which is protected and other party have to pay for it. This apply in every given option above.,

Question 6.

Global saving and investment imbalances (A)