Question

How did the Argentine crisis end?

a) depreciation, government debt default and resumed economic growth
b) devaluation to a sustainable fixed rate against the USD, international restructuring of Argentina's debt to avoid default
c) a long and deep recession with fiscal policy contraction designed to increase budget surpluses for paying foreign creditors
d) a bailout from the IMF allowing the currency to remain stable and ward off speculative attack

Answer 1

The Argentine crisis was resolved through a period of currency depreciation, government debt default, and a return to economic growth, despite facing severe challenges like bank bankruptcies and recession.

Step-by-step explanation:

The Argentine crisis ended with depreciation, government debt default, and resumed economic growth. The crisis was marked by a substantial mismatch between the debts of Argentine banks, denominated in U.S. dollars, and their ability to repay, leading to bankruptcies and a deep recession. The central bank was concerned with stabilizing the banking system and the sharp decline in aggregate demand.

Despite challenges, Argentina managed to bounce back with its rich natural resources, educated workforce, and infrastructural capacities. It is important to note that while Argentina defaulted on its loans multiple times, the country's ability to recover shows a measure of resilience in the face of economic adversity.