Globalization Quiz 2
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Questions and Answers

What was the primary objective behind establishing the International Monetary Fund and the World Bank after World War II?

  • To encourage communist economies to prosper
  • To promote smooth economic growth worldwide (correct)
  • To create a boom in East Asia
  • To serve as platforms for global financial elite meetings

    • What has been a significant contributor to the global economy's movement towards an increasingly intertwined division of labor?

  • The rise of communist economies
  • Heightened growth in East Asia (correct)
  • Financial crisis in Western countries
  • The demise of many capitalist economies

    • Which region has been mentioned as contributing strongly to global growth before facing a currency crisis?

  • Europe
  • Southeast Asia (correct)
  • North America
  • South America

    • What proposal are Asian delegates pushing for at the Hong Kong conference?

    <p>Establishing a joint crisis team with all major countries' finance ministers</p> Signup and view all the answers

    What was the primary reason behind Thailand's request to Beijing and Tokyo for bilateral loans in hard currency?

    <p>To counter speculation and stabilize the Baht</p> Signup and view all the answers

    What was the impact of the Japanese banks becoming nervous and canceling loans in Thailand?

    <p>Triggered difficulties for the first companies</p> Signup and view all the answers

    Why did Thai companies need US dollars to repay their loans abroad?

    <p>To meet their foreign currency loan obligations</p> Signup and view all the answers

    What role did George Soros play in the exchange rate crisis in Thailand?

    <p>He was a leading figure orchestrating speculative attacks on the Baht.</p> Signup and view all the answers

    Why did firms and companies that borrowed overseas in Thailand face distress when the Baht shot up to 50 Baht per US Dollar?

    <p>They faced difficulties paying back their doubled loans</p> Signup and view all the answers

    What led to the Thai Central Bank releasing the exchange rate of the Baht on July 2nd?

    <p>Pressure from overseas creditors demanding repayment</p> Signup and view all the answers

    How did investors like George Soros profit during the speculation process in Thailand?

    <p>$300 million profit by trading baht and dollar at an advantageous exchange rate</p> Signup and view all the answers

    What is the author's main concern regarding the global financial system?

    <p>The inadequate resilience of societies and economies</p> Signup and view all the answers

    What was the impact of the Asian financial crisis in the era of a globalized world economy?

    <p>It made people more aware of the need for precautions and regulations</p> Signup and view all the answers

    In what way does the author use a metaphor to describe the current state of society and economies?

    <p>Analogizing the global financial system to a car without a spare tire</p> Signup and view all the answers

    What does the author suggest was a trigger for the Asian crisis in the summer of 1997?

    <p>Neoliberal restructuring of the international financial system</p> Signup and view all the answers

    What was a consequence of the deregulation of financial institutions according to the text?

    <p>Relaxation of rules for granting loans</p> Signup and view all the answers

    What was the initial country where the financial crisis began in Asia?

    <p>Thailand</p> Signup and view all the answers

    What is described as a downside of neoliberal monetary policy in the text?

    <p>Introduction of more players in the financial market</p> Signup and view all the answers

    Which organization had published a controversial book in 1993 praising the economic growth in East Asia?

    <p>World Bank</p> Signup and view all the answers

    Which group is mentioned to have a preference for short-term profits according to the text?

    <p>Financial institutions</p> Signup and view all the answers

    Who was the chief economist of the World Bank focusing on East Asia at the time of the crisis?

    <p>Joseph Stiglitz</p> Signup and view all the answers

    What does the text imply about financiers' pay relative to other professionals?

    <p>Increased significantly</p> Signup and view all the answers

    What term was used to describe the developing and emerging countries in Southeast and East Asia, which were engines of global economic growth?

    <p>Tiger Economies</p> Signup and view all the answers

    What was one of the factors contributing to the Thailand crisis mentioned in the text?

    <p>Scale of the crisis</p> Signup and view all the answers

    Which region's financial elite was mentioned as being unprepared for future financial crises after the Asian financial crisis?

    <p>American</p> Signup and view all the answers

    What is described as an expectation of the new kind of banker that emerged according to the text?

    <p>'To compete with investors for capital'</p> Signup and view all the answers

    What factor caused the heads of the financial system and Western governments to fail to learn from the Asian financial crisis?

    <p>Speed of Politics vs. Financial Markets</p> Signup and view all the answers

    What did many financiers trade money within, according to the text?

    <p>'Two weeks, a month, or even a day'</p> Signup and view all the answers

    Which country had one of the first foreign capital inflows into its economy starting in the 1980s?

    <p>Thailand</p> Signup and view all the answers

    What did the International Monetary Fund do when a debt crisis arose in a country based on the text?

    <p>Offer loans tied to tough restructuring measures</p> Signup and view all the answers

    What was Bangkok experiencing due to an influx of money into Thailand?

    <p>$ Loans from overseas led to rapid growth</p> Signup and view all the answers

    What is one effect of deregulation on financial institutions as per the text?

    <p>Making loan granting rules more relaxed</p> Signup and view all the answers

    'The Asian financial crisis is to be the first modern financial crisis in the globalised world' - This statement implies that:

    <p>'Crisis began in Asia and spread globally'</p> Signup and view all the answers

    What changes in at least one region were mentioned after governments invested in policies focused on infrastructure and technology?

    <p>Emergence of an urban economic culture with social advancement possibilities</p> Signup and view all the answers

    What did financiers intend when they borrowed money from wealthy investors according to the text?

    <p>To make quick and high profits</p> Signup and view all the answers

    In the final stage, who played a crucial role in persuading Bob Rubin to infuse money into Korea to solve the crisis?

    <p>Bill McDonough</p> Signup and view all the answers

    What was the last resort mentioned in the text to rescue Korea involving the banks of Wall Street?

    <p>Banks agreeing to accept shorter maturities for loans</p> Signup and view all the answers

    What action did Bill McDonough take to persuade American commercial banks to give Korea more time to repay its loans?

    <p>Threatened to write off all their loans</p> Signup and view all the answers

    Which event in January 1998 signaled the beginning of the economic crisis in Indonesia?

    <p>Indonesian President Suharto signing a treaty with the IMF</p> Signup and view all the answers

    What were the consequences faced by Indonesia after signing the treaty with the IMF?

    <p>Riots, deaths, and a return to poverty</p> Signup and view all the answers

    What was the primary demand of the International Monetary Fund from the Indonesian government?

    <p>Implement massive economic cuts</p> Signup and view all the answers

    Which country recovered much sooner than Indonesia after the economic crisis?

    <p>South Korea</p> Signup and view all the answers

    What were some of the social consequences faced by South Korea during its crisis period?

    <p>Increasing levels of homelessness and bankruptcies</p> Signup and view all the answers

    Why did some players in the US take advantage of the South Korean crisis according to the text?

    <p>To buy up companies cheaply after the crisis</p> Signup and view all the answers

    What was a significant aspect of the structural reforms demanded by the IMF for the Korean economy?

    <p>Beneficial impact on the Korean economy</p> Signup and view all the answers

    How did Bill McDonough convince American banks to cooperate during Korea's crisis?

    <p>Threatened them with dire consequences for non-cooperation</p> Signup and view all the answers

    What was the ultimate factor that led to the US government deploying a significant amount of money to overcome the Global Financial Crisis of 2008 and 2009?

    <p>The willingness to stop panic and speculation</p> Signup and view all the answers

    Which country's economy was saved from default and massive economic collapse by urging the US Treasury Department to act quickly and decisively in late November 1997?

    <p>South Korea</p> Signup and view all the answers

    What was President Clinton's view regarding South Korea during its financial crisis in 1997?

    <p>It had a strong economy compared to Thailand and Indonesia</p> Signup and view all the answers

    What percentage did Korea's stock market fall by in 1997?

    <p>49%</p> Signup and view all the answers

    Why was the Korean finance minister concerned about raising interest rates on loans to 25%?

    <p>To prevent foreign capital from entering the economy</p> Signup and view all the answers

    What was the total sum of the loan package approved for Korea, as mentioned in the text?

    <p>$55 billion</p> Signup and view all the answers

    Which institution wanted to provide $21 billion as part of the loan package for Korea?

    <p>IMF</p> Signup and view all the answers

    What was the primary reason behind Camdessus demanding an increase in interest rates on loans to 25%?

    <p>To attract more foreign capital</p> Signup and view all the answers

    How did the stock market index and currency depreciation affect Korea's accumulated wealth according to the text?

    <p>Wiped out a significant portion over 20 years</p> Signup and view all the answers

    What was a significant outcome of the 1997 financial crisis in Korea?

    <p>The banking sector underwent a fundamental restructuring.</p> Signup and view all the answers

    How did Hong Kong respond to the hedge funds' attack led by George Soros in late 1998?

    <p>The city government and Central Bank erected a firewall of hard currency.</p> Signup and view all the answers

    In the aftermath of the 2008 Global Financial Crisis, what was one measure taken by Southeast Asian countries to protect their banks?

    <p>Built up very large foreign exchange holdings.</p> Signup and view all the answers

    What is one significant shift in the International Monetary Fund's perspective post-2008 financial crisis?

    <p>Emphasizing global cooperation and mid-term prosperity for struggling economies.</p> Signup and view all the answers

    What describes the relationship between the state and the private sector in Korea during its renaissance period?

    <p>A shift where the state acted as the motor of change for the better.</p> Signup and view all the answers

    What was a critical factor that contributed to Asian banks being in good shape during the 2008 financial crisis?

    <p>Efficient supervision and adoption of a risk management system.</p> Signup and view all the answers

    How did Korea manage to repay its loans faster than expected after the 1997 financial crisis?

    <p>By attracting foreign investors and recapitalizing weak banks.</p> Signup and view all the answers

    What characterized Hong Kong's response to hedge fund attacks in 1998 compared to Western strategies post-2008 crisis?

    <p>Western countries intervened heavily while Hong Kong erected a financial firewall.</p> Signup and view all the answers

    What was the main reason the IMF was reluctant to help Thailand during the crisis?

    <p>The IMF believed the crisis was mainly caused by internal factors.</p> Signup and view all the answers

    How did the lack of a player providing dollars during the speculative phase impact Thailand?

    <p>It resulted in a currency crisis and panic as foreign investors fled.</p> Signup and view all the answers

    What was one of the major concerns of finance ministers of Asian countries during the crisis?

    <p>The withdrawal of international investors and panic in financial markets.</p> Signup and view all the answers

    Why did Japan propose setting up an Asian Monetary Fund with 100 billion US dollars?

    <p>To calm international financial markets and provide large loans to affected countries.</p> Signup and view all the answers

    How did the IMF's strategy for Thailand and Indonesia affect their economies?

    <p>It caused a depression without increasing the capacity to repay debt.</p> Signup and view all the answers

    What was the Japanese government's main concern about the economic crisis spreading in Asia?

    <p>The collapse of economic power in Southeast Asia.</p> Signup and view all the answers

    Why did the US Treasury Department oppose the establishment of an Asian Monetary Fund?

    <p>To maintain dominance and oppose competition from other funds.</p> Signup and view all the answers

    What did Larry Summers, representing the US Treasury, do at the Hong Kong conference?

    <p>Opposed the establishment of an Asian Monetary Fund.</p> Signup and view all the answers

    What was one of the major concerns behind setting up an Asian Monetary Fund according to Japan?

    <p>To ensure stable financial markets and availability of large loans.</p> Signup and view all the answers

    Why were staff at Japan's Finance Ministry discussing long hours before the conference in Tokyo?

    <p>To prevent a looming recession in Japan and its impact on Asia.</p> Signup and view all the answers

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