Latin America Debt Crisis Overview

<p>A downward spiral in global trade. (A)</p> Signup and view all the answers

<p>They defaulted on their debt instead of imposing austerity. (D)</p> Signup and view all the answers

<p>They had limited influence over countries' financial decisions. (D)</p> Signup and view all the answers

<p>Revenue drops of up to 30%. (D)</p> Signup and view all the answers

<p>To ease repayment burdens due to falling export earnings. (B)</p> Signup and view all the answers

<p>Technological innovations in ICT (C)</p> Signup and view all the answers

<p>Increased importance of intellectual capital (C)</p> Signup and view all the answers

<p>It was comparable to revolutionary changes such as the steam engine or electricity (A)</p> Signup and view all the answers

<p>Advancements in communication and transportation (C)</p> Signup and view all the answers

<p>They led to a significant shift towards service-oriented jobs. (D)</p> Signup and view all the answers

<p>A gradual conversion of dollar reserves into gold. (B)</p> Signup and view all the answers

<p>Borrowing from foreign central banks. (D)</p> Signup and view all the answers

<p>To collectively manage gold reserves and stabilize gold prices. (C)</p> Signup and view all the answers

<p>The conflict between domestic spending and maintaining gold reserves. (C)</p> Signup and view all the answers

<p>Continuous gold outflows and fiscal pressures from the Vietnam War. (D)</p> Signup and view all the answers

<p>Increased inflation and trade deficits. (B)</p> Signup and view all the answers

<p>Intensifying anxieties over US gold reserves relative to the dollar supply. (D)</p> Signup and view all the answers

<p>Member nations collectively supplying gold to the market on demand. (A)</p> Signup and view all the answers

<p>To maintain a fixed exchange rate among the G-10 countries (C)</p> Signup and view all the answers

<p>Stagflation impacting economic growth (D)</p> Signup and view all the answers

<p>Milton Friedman (B)</p> Signup and view all the answers

<p>They led to deepened recessions initially but transformed economic policy (B)</p> Signup and view all the answers

<p>They controlled oil prices and production processes to maximize profits (C)</p> Signup and view all the answers

<p>The transition to floating currencies starting in 1973 (A)</p> Signup and view all the answers

<p>Oil (A)</p> Signup and view all the answers

<p>More foreign investment and minimized speculation (D)</p> Signup and view all the answers

<p>A significant decline in growth rates across developed economies (B)</p> Signup and view all the answers

<p>Neo-liberal policies focused on deregulation (B)</p> Signup and view all the answers

<p>The invention of the microprocessor (B)</p> Signup and view all the answers

<p>Relocation of manufacturing to countries with lower labor costs (B)</p> Signup and view all the answers

<p>The greater focus on sustainable energy sources (B)</p> Signup and view all the answers

<p>The globalization of supply chains (B)</p> Signup and view all the answers

<p>Adoption of pro-arab policies by EEC and Japan (A)</p> Signup and view all the answers

<p>Reduction in manual labor requirements (D)</p> Signup and view all the answers

<p>To pressure importing countries for higher oil prices (D)</p> Signup and view all the answers

<p>The Yom Kippur War between Egypt and Syria against Israel (B)</p> Signup and view all the answers

<p>It diminished the power of the 'seven sisters' in the market (A)</p> Signup and view all the answers

<p>Internal divisions began to emerge between populous and sparsely populated countries (D)</p> Signup and view all the answers

<p>A significant rise in oil prices and inflation in importing countries (D)</p> Signup and view all the answers

<p>Increased oil production from non-OPEC countries (C)</p> Signup and view all the answers

<p>Prices fell sharply, indicating an oversupply in the market (A)</p> Signup and view all the answers

<p>A rise in public spending and inflation (C)</p> Signup and view all the answers

Reduced export earnings negatively affect a country's trade balance.

Decreased exports reduce government income from taxes on exports & related activities.

Export prices fall relative to import prices, reducing trade income.

Lower agricultural prices harm rural economies and export earnings, especially for countries relying on agricultural exports.

External debt is often in US dollars or other strong currencies.

Reduced export earnings mean countries face challenges repaying their debts.

Choosing not to repay a debt, rather than cause suffering to the population.

Rising trade barriers (tariffs) during a crisis, harming global trade.

Institutional changes after the Bretton Woods system's collapse, aimed at increasing system liquidity by allowing for the suspension of convertibility and the end of fixed exchange rates.

Methods used by the US to finance spending and operations, including selling dollar reserves, seigniorage, and borrowing from foreign authorities.

The progressive reduction of US gold reserves due to countries like France and Germany exchanging their dollar reserves for gold, exceeding the supply.

A situation where the US owes more money to other countries than the amount of gold reserves it possesses.

An effort by Western economies to maintain the fixed price of gold at $35 per ounce, by providing gold to the market when demand caused prices to rise.

An attempt to profit from price increases in the gold market by exchanging currencies for gold.

The US's decision to stop exchanging dollars for gold, thereby undermining the Bretton Woods system.

A reduction in the value of a currency relative to other currencies.

President Nixon announced the suspension of dollar convertibility to gold in 1971, ending the Bretton Woods system of fixed exchange rates.

An agreement in December 1971 that aimed to maintain a fixed exchange rate system for the major currencies, allowing for a slight fluctuation.

The dollar was devalued against gold by 38 dollars per ounce in the Smithsonian Agreement, reflecting its weakening value.

An economic theory emphasizing the control of the money supply to stabilize the economy, primarily to combat inflation.

Keynesianism focuses on stimulating demand through government spending, while monetarism emphasizes controlling the money supply to fight inflation.

A combination of high inflation and stagnant economic growth, challenging traditional economic theories like Keynesianism.

The 1970s oil crisis stemmed from a sharp increase in oil prices due to factors like the OPEC embargo, causing economic instability and a shift in global power.

The idea that developing countries can benefit from adopting newer technologies with lower costs, allowing them to quickly catch up to more developed nations.

The Organization of the Petroleum Exporting Countries (OPEC) was established in 1960 by five nations: Saudi Arabia, Iraq, Iran, Kuwait, and Venezuela, aiming to control oil production and prices.

Expanding its influence, OPEC gained six more members from 1961 to 1973, representing half of global oil production.

Triggered by the Yom Kippur War, OPEC suspended oil exports to countries supporting Israel, raising prices unilaterally without consultation. This led to global inflation and economic turmoil.

The Iranian Revolution, causing production decline and price hikes, further disrupted the global oil market, weakening the power of the 'Seven Sisters' (major oil companies).

Tensions arose within OPEC between countries with large populations needing high revenues and those with small populations able to tolerate lower prices.

By the 1980s, internal divisions and increased non-OPEC oil production eroded OPEC's control over the global energy market, resulting in an oil price collapse in 1986.

The oil shocks resulted in significant consequences for the world economy, including inflation, balance of payments deficits, economic instability, and weakened international monetary systems.

While OPEC initially achieved success in controlling oil prices, challenges arose in managing the newfound wealth, including the misuse of funds for military expenditures in countries like Iran and Iraq.

A period characterized by rapid technological advancements, particularly in ICT, leading to a shift towards service-based jobs and increased global interconnectedness.

The process of integrating digital technologies into all aspects of a business, from operations to customer interactions, leading to increased efficiency and new opportunities.

The movement of economies from focusing on traditional industrial production to emphasizing knowledge-based industries and services.

The process of relocating manufacturing operations to countries with lower labor costs, facilitated by advancements in transportation and communication.

Information and Communication Technology (ICT) played a significant role in reshaping economies by facilitating global trade, communication, and the emergence of digital markets.

US dollar deposits held by oil-exporting nations, primarily originating from oil sales.

Economic policies that emphasize deregulation, market liberalization, and a reduced role of government in the economy.

The rise of personal computers, video games, and fax machines, marking the beginning of the widespread adoption of information and communication technologies (ICT).

Increased integration of ICT into businesses and homes, leading to the emergence of a 'new economy' driven by technological advancements.

Companies' ability to adapt their production processes quickly to meet changing market demands, enabled by technological advancements.

Relocating production processes to countries with lower labor costs, contributing to the globalized supply chain.

Using digital technologies to process and store data, streamlining production processes and increasing efficiency.