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Chapter 15: Developing Countries and International Finance II: The Global Capital Flow Cycle Multiple Choice Questions 1. Asia was the largest recipient of capital inflows, accounting for almost _____ of total flows to all developing countries in the first half of the 1990s. a) 10% b) 30% c) 50% d) 70% e) 90% Answer: c 2. According to Oatley, historical evidence suggests that more volatile capital flows have been associated with a) higher economic growth rates over the short run. b) higher economic growth rates over the long run. c) lower economic growth rates over the long run. d) lower economic growth rates over the short run. e) boom- and-bust growth rates over the long run. Answer: c 3. “Hot money” refers to a) bond and derivative funds. b) private capital that can be withdrawn at the first hint of trouble. c) public capital that cannot be easily withdrawn. d) money obtained through drugs and illegal activities. e) money hidden in secret foreign bank accounts. Answer: b 4. Financial crises became all too common during the 1990s. Each crisis was distinctive but shared the similarities that they a) involved some form of fixed exchange rate and a heavily reliance on short-term foreign capital. b) involved some form of floating exchange rate and a heavily reliance on shortterm foreign capital. c) involved some form of fixed exchange rate and a heavily reliance on long-term foreign capital. d) involved some form of floating exchange rate and a heavily reliance on long-term foreign capital.
