29. 30. 31. 32. 33. 34. The effect on consumption in a closed economy _:_a___a__rg_s_u_l__t__gf a temporary shock is: that consumption smoothing is not possible. a temporary change in consumption. a b. c. a permanent change in consumption. d. that consumption smoothing is not possible and there is a permanent change in consumption. For the three years after a severe economic shock such as that caused by a hurricane, typically: a) nations enjoy higher consumption. b) creditors become impatient for debtors to begin their payback. c) investment rises and saving falls; the current account deficit rises, financed by financial inflows. d) domestic financial markets areableto handle the situation without a decrease in consumption. Countries can depend on external financial assets as a buffer to smooth consumption if and only if: a. they do not allow their debts to roll over and grow without limit at the real rate of interest. b. they distribute their portfolio risks efficiently to maximize returns. c. their assets cannot be confiscated by foreigners. d. they find new investment opportunities in the domestic market. Which of the following statements is NOT correct? a. Many poor nations have backward financial markets, giving the public no access to foreign investments. b. Financial markets offer little security and government regulation in poor nations. c. In many poor nations, few people are rich enough to save, and there is capital flight. d. Poor nations benefit greatly from globalization through___t_h_e___usg_g_f foreign investments. The present discounted value of an infinite stream of payments of $5 per year when the interest rate is 20% is: a. $1. b. $5. c. $25. d. $100. In theory, financially open economies can: a. manipulate their trade accounts to avoid imbalances. b. avoid all economic shocks or downturns. c. lower the unemployment rate but cannot control inflation. d. use access to the international financial markets to keep investment and consumption stable