Question

Which two of the following were problems facing argentina in the 1990s?

a) hyperinflation asset bubble
B) economic recession deflation
C) lack of monetary autonomy because of membership in a monetary union

Answer 1

Argentina faced economic recession (option B) and an asset bubble (option A) in the 1990s, exacerbated by hyperinflation from the previous decade and a banking crisis due to inability to repay U.S. dollar debts after currency depreciation.

Step-by-step explanation:

The two problems facing Argentina in the 1990s were economic recession and the risk of the banking system collapsing due to an asset bubble burst. During this period, Argentina attracted vast inflows of foreign capital, prompting fears that a sudden reversal could lead to a decrease in currency value and a significant economic downturn. The situation worsened when Argentina's banks could not repay the U.S. dollar-denominated debts following a depreciation of the Argentine peso.



Such a depreciation leads to a decrease in demand for the country's currency and a lowering of the exchange rate. Moreover, Argentina suffered from hyperinflation in the mid-1980s to mid-1990s, which compounded its economic challenges before the recession of the late 1990s.