Author Question: Compare and contrast the financial crises in Mexico in 1994 and in Asia in 1997. What will be an ... (Read 47 times)

stevenposner · **on:** Jun 29, 2018

Compare and contrast the financial crises in Mexico in 1994 and in Asia in 1997.

What will be an ideal response?

Question 2

Which of the following events could result in the consumption function shifting from CF0 to CF1?

A) a decrease in wealth
B) an increase in expected future income
C) a decrease in disposable income
D) an increase in disposable income
E) an increase in the real interest rate

Benayers · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

In both cases large amounts of foreign investment poured into the countries. The Mexican crisis was precipitated by political events that caused concern among foreign investors and led them to pull funds out. Mexico was forced to devalue the peso, which exacerbated the crisis. In Asia, investors became pessimistic as some of their investments lost money and the withdrawal of funds devalued currencies throughout the region. Thus in both cases the large movements of global capital market funds were part of the story of the crisis.

Answer to Question 2

B