ECONOMICS 353 (SECTION 2) L. Tesfatsion/Spring 01 EXERCISE SET 9: 5 POINTS TOTAL DUE: Tuesday, April 17, 2:10 P.M. *IMPORTANT REMINDER: LATE ASSIGNMENTS CANNOT BE ACCEPTED -- NO EXCEPTIONS* *NOTE:* Please FILL IN YOUR NAME, BIRTH DATE, AND ID (SOC SEC) No. on Side 1 of a BROWN bubble (answer) sheet and write "353 SECTION 2-EXERCISE SET 9" in the top margin of Side 1. Use a #2 pencil to MARK YOUR ANSWERS on Side 1 of the bubble sheet to the following five multiple choice questions: 1-2 The "economic growth" of a country refers to changes in A. its economic structure (infrastructure, organization, and governance). B B. the size of its economy, as measured by GDP. C. improvements in its balance of payments. D. the amount of land encompassed within its borders. E. all of the above. 2-2 According to Mishkin, factors such as a weak legal system, absence of standard accounting practices, and inadequate or inappropriate government regulation A. can impede the flow of funds from savers to borrowers. B. are common problems in developing and transition economies. C. worsen both adverse selection and moral hazard problems. D. explain why some countries stay poor while others grow richer. E E. all of the above. 3-2 According to Mishkin, financial crises occur when there is a disruption in the financial system that A. causes a sharp sudden contraction in the real money supply. B B. causes a sharp increase in moral hazard and adverse selection problems. C. causes a sharp sudden contraction in employment. D. causes a sharp sudden spike in inflation. E none of the above. 4-2 According to the data on the Great Depression passed out in class, and assuming the inflation rate was correctly expected, which of the following factors COULD have been key factors contributing to the prolonged and serious nature of the financial crisis during the Great Depression: A A. a decline in the aggregate price level during 1929--1933 B. a sharp contraction in the real money supply during 1929-1933 C. a sharp contraction in the real interest rate during 1929--1933 D. all of the above E. only A and B. 5-2 According to Mishkin, basic ways in which the financial crisis in Mexico during 1994-1995 was SIMILAR to a typical financial crisis occurring in the U.S. during the nineteenth and twentieth centuries include: A. the crisis was partly precipitated by a rise in interest rates abroad. B. speculative currency attacks led to a foreign exchange crisis. C. the crisis was partly precipitated by a decline in the stock market. D D. only A and C. E. all of the above.
