Question In 2001, the government of Argentina faced large expenditures and tax rev

01 Jun Question In 2001, the government of Argentina faced large expenditures and tax rev

Posted at 02:51h in Essay Writing Services by Past Papers

Question

In 2001, the government of Argentina faced large expenditures and tax revenues were low due to a recession, so Argentina was running a deficit. Printing money to pay for the deficit was not possible since Argentina had a currency board, which fixes the amount of cash which can be printed. Further, the government could not borrow abroad to finance the deficit. Foreign investors refused to lend because they feared Argentina would default. Therefore, the government forced local banks to make loans to the government. The government lowered the required reserve ratio, took the existing bank reserves, and gave the banks I.O.U.’s (bonds) which the government later defaulted on. Since the reserves were gone, the local banks were unable to repay depositors and went out of business.

a. At the end of the day, who paid for Argentina’s deficit? (2 points)

b. How should have depositors responded if they believed ahead of time that Argentina would default on the I.O.U.’s (bonds)? (2 points)

c. Suppose depositors responded as in your answer to (b). What happens to:

1. the currency-to-deposit ratio? Why? (2 points)

2. the money supply? why? (2 points)

3. the price level? Why? (2 points)

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.

Do you need an answer to this or any other questions?

About Writedemy

We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.

How It Works

To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

Are there Discounts?

All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.

Hire a tutor today CLICK HERE to make your first order

Print page