In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open-economy macroeconomic model predicts that this should have A. raised Argentinean real interest rates and caused the Argentinean currency to appreciate. B. raised Argentinean real interest rates and caused the Argentinean currency to depreciate. C. lowered Argentinean real interest rates and caused the Argentinean currency to depreciate. D. lowered Argentinean real interest rates and caused the Argentinean currency to appreciate.
In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open-economy macroeconomic model predicts that this should have A. raised Argentinean real interest rates and caused the Argentinean currency to appreciate. B. raised Argentinean real interest rates and caused the Argentinean currency to depreciate. C. lowered Argentinean real interest rates and caused the Argentinean currency to depreciate. D. lowered Argentinean real interest rates and caused the Argentinean currency to appreciate.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open-economy macroeconomic model predicts that this should have
A. raised Argentinean real interest rates and caused the Argentinean currency to appreciate.
B. raised Argentinean real interest rates and caused the Argentinean currency to depreciate.
C. lowered Argentinean real interest rates and caused the Argentinean currency to depreciate.
D. lowered Argentinean real interest rates and caused the Argentinean currency to appreciate.
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