Answer to Question 1
A chaebol is a family of interrelated firms in South Korea. To promote economic development after the Korean War, South Korea relied on tight cooperation between the government and 30 or so large, privately owned, and family-centered conglomerates that dominate the Korean economy. The most important of these conglomerates, or chaebol, were Samsung, Hyundai, Daewoo Group, and LG (formerly Lucky-Goldstar). Unfortunately, Korea's growth came to a screeching halt as a result of the 1997-1998 Asian currency crisis, and many of the chaebol were plunged into financial difficulties. Many observers argued that their problems were due to overexpansion and the poor lending practices of Korean banks. Many of the chaebol seemed to be more interested in size than profitability and borrowed money to enter industries already burdened by overcapacity, such as automobiles, computer chips, and steel manufacturing. Some of the chaebol learned their lesson and emerged from the crisis as stronger and leaner competitors.
Answer to Question 2
B
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