BSA 2B GROUP 1

ASIAN GROWTH ECON-225/ MW (12:00-1:30)

TRUE OR FALSE

1. The success of Asian economies was particularly sensitive to the amount of government
intervention in the microeconomic aspects of the economy. False*

2. The hypothesis of absolute convergence is applicable to different countries regardless of the

differences in economic characteristics. FALSE*

3. Positive numbers indicate that the Human Development Index is lower than the Gross
National Product rank. Answer: False*

4. An economy's productivity rise as the number of educated workers increases since skilled
workers can perform tasks more efficiently. Answer: True*

5. Fiscal policy is an economic policy that manages the size and growth rate of the money supply
in an economy. False*

6. Economic growth is an increase in the production of goods and services in an economy.

TRUE*

7. One of the four primary areas of growth is macroeconomic stability which highlights the
importance of outward-looking policies and the emphasis on exports and foreign direct
investment. False*(openness)

8. The transformation to labour-intensive industrialization with an emphasis on exports was

supported by the inflow of foreign direct investment. True*

9. Subsidized industries are not sanctioned if production and efficiency targets are not meet
which leads to an efficient industry sector in South Asia. FALSE*

10. GDP is a used tool for analyzing the process of Economic growth. False* (production
function)

Multiple Choices

1. When inflation is too strong, the economy may need a slowdown. In such a situation, how
can a government use fiscal policy?

a. Increase taxes to suck money out of the economy.

b. Decrease the income revenue to slow economic activity by decreasing individuals’ disposable
income.

c. Increase Government spending and thereby decrease the money in circulation.

d. All of the statements are correct.

Answer: A. Increase taxes to suck money out of the economy

2. Education factors that affect labor market flexibility includes all the following, except.

a. labor unions and job information

b. skills and training

c. minimum wage restrictions

d. All of the choices are factors

Answer: D. All of the choices are factors

3. This refers to how central banks manage liquidity to create economic growth.

a. Fiscal Policy

b. Monetary Policy

c. Prudent Fiscal

d. Investment

Answer: B. Monetary Policy

4. It is even more important than physical capital raising the rate of growth.

a. technology

b. government

c. education

d. labor

Answer: C. Education

5. The following are the increases that can contribute to economic growth, EXCEPT.

a. Labor Force
b. Capital Goods

c. Biology

d. Technology

Answer: C. Biology

6. It refers to a process of gradual transformation.

a. Development

b. Growth

c. Economic Growth

d. GDP

Answer: A. Development

7. Which of the following is not considered as one of the Asian Tigers?

a. Taiwan

b. Singapore

c. South Korea

d. None of the choices

Answer: D. None of the choices

8. All of the following are part of efficiency-seeking motives except?

a. Reduce sourcing and production costs.

b. Access raw materials.

c. Avoid trade barriers.

d. Locate production near customers.

Answer: B. Access of raw materials.

9. States that various parameters are allowed to change between different countries or group of
countries in the convergence of income.

a. Absolute convergence
b. Club convergence

c. Conditional convergence

d. Income convergence

Answer: B. Conditional Convergence

10. The South Asian countries’ makes it easier to respond quickly to a shift for a higher-skilled
occupations.

a. Labor market flexibility

b. Educational literacy

c. State security

d. Macroeconomic policies

Answer: A. Labor Market Flexibility

BSA 2B (GROUP 2)

ASIAN ECONOMIC CRISIS AND GLOBAL FINANCIAL CRISIS

1. It is a situation in which asset prices appear to be based on inconsistent views about the
future.

A. Current Account Deficits

B. Economic Bubble

C. Hot money flow

D. Bail out

2. He was called the "First political casualty of Southeast Asia's economic crisis."

A. Vice president B. J. Habibie

B. Prime Minister General of Thailand, Yongchaiyudh

C. Surayud Chulanont

D. Herbert Hoover

3. It becomes a negative form of investing based on greed.

A. Current Account Deficits

B. Bailout

C. Speculative Attack

D. Subprime mortgage crisis

4. What country suffered the most during the Asian Financial Crisis based on the change in
currency exchange rate?

A. Indonesia

B. Philippines

C. Thailand

D. Malaysia

5. It is one of the triggering events in which both government and private firms built up high
external debt ratios and experienced difficulty in paying their debt.

A. Debt default

B. Higher US interest rate

C. Contagion

D. Bail out

6. Which of the following is not a government response to save the system on the crisis.
A. Central banks stepped in and provided liquidity to the banking system allowing it to keep
functioning

B. Governments provided bailouts for major financial institutions to avert their collapse or took
them over outright

C. Governments increased taxes and raised spending to prevent the economy from falling into
a deep recession or even depression

D. Expanded the money supply

7. Who took over the presidency when President Suharto resigned from the position?

A. Surayud Chulanont

B. Herbert Hoover

C. Prime Minister General of Thailand, Yongchaiyudh

D. Vice president B. J. Habibie

8. What effects on developing countries that due to recession fewer economic migrants are
coming because of decline in?

A. Commercial Lending

B. Trade and Trade Prices

C. Remittances

D. Foreign Direct Investment (FDI) and Equity Investment

9. What effects on developing countries that growth in China and India has increased imports
and pushed up the demand for copper, oil and other natural resources, which has led to
greater exports and higher prices, including from African countries. Eventually, growth in
China and India is likely to slow down, which will have knock on effects on other poorer
countries.

A. Foreign Direct Investment (FDI) and Equity Investment

B. Remittances
C. Trade and Trade Prices

D. Commercial Lending

10. _____should play a major role in regulating and auditing the global financial system.

A. Foreign Direct Investment (FDI) and Equity Investment

B. International Monetary Fund

C. Trade and Trade Prices

D. Federal funds reserve

True or False.

11. The International Monetary Fund emphasized four main strategies to address the Asian
Financial Crisis.

- False

12. The rebuilt of official international reserves was one of the signs and substance of recovery
from the crisis.

- True

13. Investment in human capital is important in maintaining the growth of economies.

- True

14. The strategies of IMF to address the crisis had three main components namely financing,
macroeconomic policies and structural reforms.

- True

15. Asian Financial crisis began in Thailand because of the collapse of Thai baht and was forced
to let its currency fixed.

- False
16. Large current account deficit is a reflection of very high rates of economic growth and
consumption.

-True

17. Deregulation in the financial industry was the primary cause of financial crisis.

-True

18. Recession is an incline in economic activity in a designated region

- False

19. Banker will receive half of its remaining payment due when home owners default on their
mortgage payment

- False

20. The immediate cause or trigger of the crisis was the bursting of the Russia’s Housing
Bubble which peaked in approximately 2005–2006.

-False

BSA 2B (GROUP 3)

SAVINGS AND FINANCIAL SYSTEM

TRUE OR FALSE

1. Newspaper Stock table is a market capitalization weighted index of the 500 largest publicly
traded companies in the US. FALSE

2. When a business firm sales a bond, it has engaged in equity finance. FALSE

3. Compared to stocks, Bonds offer both higher risk and potentially high returns. FALSE

4. Financial system functions as intermediaries and facilitates the flow of funds from the area of
surplus to the areas of deficit. TRUE

5. Future results are certain. FALSE

6. Finance is the study of how people make decisions regarding allocation of resources over
time and handling risk. TRUE

7. Future value is the amount of money in the future that an amount of money today will yield.
TRUE

8. Present value refers to the amount of money in the future. FALSE

9. In a closed economy, saving is what remains after consumption expenditures and government
purchases. TRUE

10. Investment is the purchase of capital equipment and structures. TRUE

11. Public saving and the government's budget surplus are the same thing. TRUE

12. In a closed economy, investment is always equal to saving regardless of where the saving
came from -- public or private sources. TRUE

13. A person is said to be risk averse if she exhibits a dislike of uncertainty. TRUE

14. Diversification cannot remove aggregate risk. TRUE

15. The efficient markets hypothesis is the theory that asset prices reflect all publicly available
information about the value of an asset. TRUE

16. Diversification refers to the reduction of risk achieved by replacing a single risk with a large
number of smaller unrelated risks. TRUE

17. The quantity supplied of loanable funds is greater if real interest rates are higher. TRUE

18. Government policies that increase savings or increase investment will have the same impact
on interest rates. FALSE

19. A reduction in the budget deficit should shift the supply of loanable funds to the right, lower
the interest rate and increase the quantity demanded of loanable funds. TRUE

20. Crowding out occurs when a budget deficit is financed by borrowing that leads to a higher
equilibrium interest rate in the market for loanable funds and decrease in private investment
expenditure. TRUE

BSA 2A
Savings and the Financial System Questions

1. The permanent income hypothesis (PIH) of Friedman (1957) and Hall (1978) assume an
infinite lifetime horizon. True or False?
Ans: True

2. Life Cycle Hypothesis assumes an infinite horizon. True or False?

Ans: False
3. Families can borrow and save at will in order to smooth their consumption patterns to
compensate for fluctuation in income. True or False?
Ans: True

4. Savings can cause changes in income and income growth may not contribute to a
virtuous growth cycle, where rapid growth leads to an increase in saving. True or False?
Ans: False

5. Which of the following is not a significant variables for developing countries?

a. Per capita income
b. Terms of trade
c. Rate of growth of GDP
d. None of the above

Ans: D. None of the above

6. All the countries in developing Asia are in the high and medium income countries which
have similar patterns of significant variables. True or False?
Ans: True

7. Financial systems are dominated by commercial banks. True or False?

Ans: True

8. The system of financial repression were characterized by high or positive real interest
rates and high ratio of monetary assets to GDP/GNP. True or False?
Ans: False

9. Financial liberalization removes all of the restrictions to the workings of markets created
by repression. True or False?
Ans: True

10. In the 1960s and 1970s, commercial banks were tightly controlled by governments. True
or False?
Ans: True

11. After financial liberalization, in South Asia the pace of reforms was faster. True or False?
Ans: False

12. The ability of the financial system to cope with the rapid inflow of foreign capital and
strong growth in securities and real estate markets was not complicated. True or False?
Ans: False
13. One of the six reason to entry into the informal finance is Bank lend primarily for
investment and not for consumption. True or False?
Ans: True

14. It is defined as small unsecured and short- in maturity funding capital sourced from
private lender or relatives.
Ans: Informal Finance

15. – 16 Give at least 2 Forms of Informal finance.

Ans: group finance, money lender, landlords, Non- Government Organization (NGO)

17. This caused the main impact of monetary policy on informal finance and on the poor on
general.
a. Appreciation of cash
b. Inflation tax
c. Credit lines
d. None of the above

Ans: B. Inflation Tax

18. Cash depreciates rapidly during inflation. True or False?

Ans: True

19. The Global Financial Crisis of 2008-2009 is also referred to as "The Great Recession ".
True or False?
Ans: True

20. The tool used by central banks to control economic activities like controlling the total
volume of money in circulation and price level.
a. Monetary policy
b. Inflation tax
c. Credit lines
d. None of the above

Ans: A. Monetary Policy

21. How low did the peso droppped on Estrada's presidency compared to the dollar?

a. P6O
 b. P55.35

c. P55.75

d. P75.55

ANSWER: c. P55.75

22. The crisis was mildly felt in the Singapore due to active management of the government,
to cushion and guide the economy to a soft landing, the Monetary Authority of
Singapore ___________.

a. allowed a gradual 20% depreciation of the Singapore dollar

b. allowed foreign speculators to enter their country

c. disallowed bringing singaporean dollar to other countries.

d. nothing was done, because in less than a year, Singapore's economy have already fully
recovered.

ANSWER: a. allowed a gradual 20% depreciation of the Singapore dollar

23. What's the starting point of the Asian Financial Crisis?

a. no prudent regulations

b. US recession was over

c. When Thai baht collapsed

d. Crony Capitalism

ANSWER: c. When Thai baht collapsed

24. Default rate reached _ percent during the third quarter of 2008.

a. 3.7
 b. 7.3

c. 5.2

d. 4.5

ANSWER: c. 5.2

25. Brazil, Russia, India, and ___, also known as the BRIC countries, enhanced their power
vis-à-vis the United States, Western Europe, and Japan.

a. China

b. Chile

c. Canada

d. Czech Republic

Answer: a. China

26. The _____'s primary concern was to manage the monetary policy and was least
bothered about the housing bubble and dot-com bubble.

a. Monetary Aurthority

b. Federal Reserve

c. International Monetary Fund

d. ASEAN

ANSWER: b. Federal Reserve

27. The first impact of the global crisis on this country was felt in the stock market in January
2006.
 a. Japan

b. Hong Kong

c. South Korea

d. India

ANSWER: d. India

28. This is a general term for extending financial support to a company or a country facing
a potential bankruptcy threat.

a. Bailout

b. Lending

c. Speculators

d. Central Provident Fund

ANSWER: a. Bailout

29. This country is the epicenter of the 2008 global financial crisis.

a. Thailand

b. United States

c. Indonesia

d. South Korea

ANSWER: b. United States

30. ______ provides loans necessary to stabilize the Asian economies during the 1997 Asian
financial crisis.

a. Bangko Central

b. World Bank

c. Federal Reserves

d. International Monetary Fund

ANSWER: d. International Monetary Fund

31. The global Financial Crisis of 2008 is the most severe financial crisis that the world has
ever faced since the Great Depression of the 1930s.

ANSWER: True

32. An SEC Rule change adopted in April 2008 led to highly leverage lending practices by
investment banks and their quick demise when default rates increase.

ANSWER: False

33. By the fall of 2008, borrowers were defaulting on subprime mortgages in high numbers,
causing turmoil in the financial markets, the collapse of the stock market, and the
ensuing global Great Recession.

ANSWER: True

34. In hopes of protecting their currency, Malaysia, made a move of stopping the overseas
trade in ringgit currency and other ringgit assets.

ANSWER: True

35. One of the consequence felt by Asian countries regarding their economy, they became
more open to foreign direct investment.

ANSWER: True
36. In the 1997 Asian financial crisis, IMF did not implement conditions after lending money
to those struggling Asian countries.

ANSWER: False

37. Globalization contributed to the extraordinary accumulation of wealth by a relatively

few individuals and created greater inequality.

ANSWER: False

38. Malaysia, Indonesia and Thailand were the three most affected countries.

ANSWER: False

39. No prudent regulations and lack of risk management are the only causes of Asian
Financial Crisis.

ANSWER: False

40. Before the crisis, Asia was experiencing a golden era.

ANSWER: True

41. In the early stages of development agriculture accounted for 1/3 to 1/2 of the GDP and
employed 1/2 or more of the labor force.

Ans. False

42. The share of the Service sector in employment is lesser than the share of agriculture
sector.

Ans. False

43. Its employment share is on average, the smallest of the three sectors.

a. Agriculture

b. Industry
 c. Services

d. None of the choices

Ans. b. Industry

44. Modern development is in which new activities emerge yet the old ones do not
disappear.

Answer: False

45. Economic development begins with the development of agriculture.

Ans. True

46. Some Asian countries shift to an Open Market Economic System due to their economic
and political experiences.

ANSWER: True
47. The most salient feature of this process in Asia was the change in the structure of the
economy, especially the decline in agriculture’s shares of both output and employment,
with an increase in the shares of industry and services.

a. Modern Growth

b. Modernization

c. Modern Development

d. Growth and Development

Answer: C. Modern Development

48. Modern development is a process that is fully complete in all Asian countries.

Answer: False

49. There was an evident shift from the agricultural sector towards the industry and service
sectors in Asia.
 Answer: True

50. It is an economic system which characterized by the absence of tariffs, taxes and any
other regulations that interfere with the free-market activity.
ANSWER: Open Market Economic System

51. Cambodia under Pol-Pot regime was considered as one of the most civilized and
harmless in recent history.

ANSWER: False
52. ASEAN was formed as a symbol of success of the Open Market Economic System in
Southeast Asia.

ANSWER: True

53. Industrial policy is a strategic effort by state to encourage development and growth of a
sector of the economy. True or False

Ans. True
54. It is the development of industries in a country or region on a wide scale.

A. Industrialization

B. Modernization

C. Globalization

D. Regionalization

Ans. A. Industrialization

55. Economic openness allows foreign capitals to invest in one state and engage in non
domestic transactions.

Ans. True
56. Selective industrial policy is a policy intended to promote non specific industries as
against general policies to promote modernization.
Ans. False
57. The differences between Asian countries in geographical sizes, natural endowments,
population size, income level, and political systems contributed to differences in policy
choices that resulted in a diversity of development outcomes.

Ans. TRUE

58. The greater the level of export sales, the lesser the volume of dollars flowing into the
region.

Ans. FALSE

59. High employment means a greater number of goods and services can be produced and
an increase in output, which can result in economic growth.

Ans. TRUE

60. During 2008 - 2009, the GDP growth rate in Asia was more than double that in
industrialized countries.

Ans. FALSE