1) In emerging market countries, many firms have debt denominated in foreign currency like the dollar or yen. A depreciation of the domestic currency
A) results in increases in the firm”s indebtedness in domestic currency terms, even though the value of their assets remains unchanged.
B) results in an increase in the value of the firm”s assets.
C) means that the firm does not owe as much on their foreign debt.
D) strengthens their balance sheet in terms of the domestic currency.
2) A sharp depreciation of the domestic currency after a currency crisis leads to
A) higher inflation.
B) lower import prices.
C) lower interest rates.
D) decrease in the value of foreign currency denominated liabilities.
3) The key factor leading to the financial crises in Mexico and the East Asian countries was
A) a deterioration in banks” balance sheets because of increasing loan losses.
B) severe fiscal imbalances.
C) a sharp increase in the stock market.
D) a sharp decline in interest rates.