International financial flows have changed in meaningful ways, and these changes were brought to the attention of policy makers by the Asian financial crisis. Describe three changes
What will be an ideal response?
First, international financial flows were dramatically greater than in prior decades. Second, many developing countries became active participants in international finance in a meaningful way. Finally, more so than in the past, contagion effects can instantaneously spread a crisis from one area to another.
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Trade dollarization refers to the phenomenon of:
a. the practice of insisting on trade in U.S. dollars. b. the fact that many international commodities are traded in U.S. dollars only. c. the fact that many dollars have flowed out of the U.S. and are used in other nations as their national currency. d. the falling dollar combined with a rising trade balance.
When a commercial bank borrows directly from the Fed, it pays
A) a zero rate of interest. B) an interest rate called the federal funds rate. C) an interest rate called the discount rate. D) the Fed in a mutually agreed upon quantity of gold reserves in its vaults.