Latin American Economics

Front 1

What are the ten tenets of the Washington Consensus, as delineated by John Williamson?

Back 1

-Fiscal discipline
-Public expenditure prioritization
-Tax reform
-Market determined, modest interest rates
-Competitive exchange rates
-Import liberalization
-Unrestricted FDI
-Privatization
-Deregulation
-Property rights

Front 2

What is Ricardian equivalence?

Back 2

The notion that individuals adjust their savings behavior to anticipate future taxation, so that whether public expenditure is financed by taxation or bonds has no impact on aggregate demand.

Front 3

What does the primary deficit not take into account?

Back 3

Interest payments

Front 4

Does the Washington Consensus support or discourage sustained fiscal deficits?

Back 4

Discourage

Front 5

How does the Washington Consensus feel about subsidies?

Back 5

They should be eliminated when possible

Front 6

Name at least 2 sectors deemed appropriate for public expedinture by the Washington Consensus.

Back 6

Health care, education, public administration

Front 7

The Washinton Consensus believes the tax base should be _______ and the marginal tax rate should be ______.

Back 7

Broad, moderate

Front 8

According to the Washington Consensus, how should interest rates be determined?

Back 8

By the market

Front 9

What does the Washington Consensus say about exchange rates?

Back 9

They should be competitive, and preferably market-determined

Front 10

According to John Williamson, what is the worst form of protection?

Back 10

Import licensing

Front 11

According to the Washington Consensus, what should a country's attitude toward foreign direct investment be?

Back 11

Liberal, encouraging

Front 12

Would a policy recommendation be positive or normative economics?

Back 12

Normative

Front 13

What are the two extremes that determine the far left and far right in economics?

Back 13

Complete laissez-faire, complete government control

Front 14

What two countries are cited as exceptions to the general Latin American trend of increased access to foreign capital?

Back 14

Ecuador, Argentina

Front 15

What country is cited as an exception to the general trend of a friendlier attitude towards foreign direct investment?

Back 15

Venezuela

Front 16

What two countries are cited as exceptions to the trend of convergent monetary policy?

Back 16

Argentina, Venezuela

Front 17

What country is cited as an exception to the trend of a preference for floating versus fixed exchange rates?

Back 17

Ecuador

Front 18

What country is cited as an exception to the trend of diminished state participation in the economy?

Back 18

Venezuela

Front 19

What two countries are cited as exceptions to the trend of consolidation of democracy?

Back 19

Venezuela, Argentina

Front 20

What are the four basic components of a government budget?

Back 20

Tax revenues, non-tax revenues, current expenditures, capital expenditures

Front 21

Into what two categories is 'current expenditures' divided?

Back 21

Interest, non-interest

Front 22

What are the four primary methods governments can use to finance budget deficits?

Back 22

Sale of debt to resident investors, sale of debt to non-resident investors, sale of debt to central bank, sale of state assets

Front 23

What are factor services?

Back 23

The cross-border services of factors of production such as capital (loan capital or equity capital) and laor (migrant workers)

Front 24

What is the largest component of unrequited transfers in Latin America?

Back 24

Remittances from abroad

Front 25

What are the two main components of the current account?

Back 25

Commerce in goods and services, plus unrequited transfers

Front 26

What is the trade balance?

Back 26

Merchandise exports minus merchandise imports

Front 27

What is added to the trade balance to arrive at the current account balance?

Back 27

Factor service balance, non-factor service balance, unilateral transfers

Front 28

Do higher foreign purchases of local debt increase or decrease the capital account balance?

Back 28

Increase

Front 29

Do higher domestic purchases of foreign securities increase or decrease the capital account balance?

Back 29

Decrease

Front 30

Does incoming foreign direct inestment increase or decrease the capital account balance?

Back 30

Increase

Front 31

Do foreign deposits with local banks increase or decrease the capital account balance?

Back 31

Increase

Front 32

What is the balance of payments?

Back 32

The summary accounting for all of a country's international transactions over a given period (a flow concept).

Front 33

How is the balance of payments calculated?

Back 33

Balance of payments = the sum of the current and capital accounts (must equal 0)

Front 34

What is the basic GNP equation?

Back 34

GNP = C + I + G + X - M

Front 35

What is the basic equation for national savings?

Back 35

National savings = R + GNP - C - G

Front 36

What is the basic equation for a current account deficit?

Back 36

Deficit = M - X - R

Front 37

What is the basic equation for investment, taking into account foreign remittances?

Back 37

Investment = [R + GNP - C - G] + (M - X - R)

Front 38

What is the basic equation for a government deficit?

Back 38

Deficit = G - T, or expenditures minus taxes

Front 39

What two countries escaped the negative growth trend in the 80's?

Back 39

Colombia, Chile

Front 40

What were the only two countries experiencing positive per-capita income growth in the late 90's?

Back 40

Mexico, Chile

Front 41

What are some of the adverse effects of income inequality?

Back 41

Violence, weak institutions, increased difficulty in responding to economic shocks

Front 42

What were some of the dominant external influences on Latin America's economies during the late 90's?

Back 42

Upward pressure on interest rates, strengthening activity in industrial countries, contagion from emerging market crises

Front 43

What is the Mexican 'sexenio' curse?

Back 43

The tendency for outgoing presidents to devalue the currency at the end of their 6-year term

Front 44

What president took power when the Mexican sexenio trend was broken?

Back 44

Vicente Fox

Front 45

What was the purpose of Mexican president Miguel de la Madrid's pacto de solidaridad?

Back 45

To curb inflation

Front 46

What does Weintraub mention as the main cause of inflation in Mexico during the 70's?

Back 46

Public sector deficits

Front 47

What president nationalized banks in Mexico in 1982?

Back 47

Jose Lopez Portillo

Front 48

What are Mexican cetes?

Back 48

Treasury certificates denominated in pesos

Front 49

What are Mexican tesobonos?

Back 49

Treasury bonds denominated in pesos but indexed to the dollar

Front 50

What internal 1994 political event does Weintraub say lowered Mexico's foreign reserves by $10 billion?

Back 50

The assassination of presidential candidate Luis Donaldo Colosio

Front 51

What is a Tobin tax?

Back 51

A tax on international capital movements

Front 52

What is the moral hazard issue concerning the Mexico bail-out?

Back 52

The concern over the rescue of international investors sending money to Mexico looking for high profits

Front 53

What external 1998 economic event caused Brazil's economy serious problems?

Back 53

Russia's default

Front 54

How did Brazil and Mexico differ during their respective crises in terms of foreign reserves?

Back 54

Brazil lost $30 billion in one month, which took Mexico a full year to lose

Front 55

What changes did the IMF make Brazil take with their currency during the Sept. 1998 bailout agreement?

Back 55

None

Front 56

When did Brazil finally allow its currency to float?

Back 56

January 1999

Front 57

What Argentine Economy Minister introduced the convertibility system in 1991?

Back 57

Domingo Cavallo

Front 58

What was the Argentine peso pegged to in 1991?

Back 58

The US dollar

Front 59

What caused the overvaluation of the Argentine peso after 1991?

Back 59

The appreciation of the dollar

Front 60

What Argentine president resigned in December 2001?

Back 60

Fernando de la Rua

Front 61

What caused the deterioration in Latin America's terms of trade just after the 1997 crisis?

Back 61

Sharp fall in the price of commodities in international markets

Front 62

According to Bour, what was the country most affected by the external environment?

Back 62

Brazil

Front 63

What three effects does Bour say the Russian crisis had on Latin America's economies?

Back 63

Negative shock to commodity prices, terms of trade shock, and credit rationing shock

Front 64

What is the Mead-Salter-Swan-Dornbusch model?

Back 64

Illustrates that, in reducing a current account deficit, expenditure-reducing policies must be accompanied by expenditure and output-switching policies to keep internal balance (unemployment) under control.

Front 65

According to Ocampo, what were the main features of the early 90's in Latin American economies?

Back 65

Increased inflows of external capital, real appreciation of local currencies, and reduced inflation

Front 66

What is the main purpose of the Copper Stabilization Fund and the Petroleum Stabilization Fund in Chile?

Back 66

To reduce the volatility of consumer prices or the income received by public and private economic agents

Front 67

What is the liquidity ratio?

Back 67

M2/GDP