Reread the Country Focus “The IMF and Iceland’s Economic

Recovery,” and then answer the following questions:

a. What were the main causes of Iceland’s economic troubles in 2008?


b. Was Iceland facing a classic currency crisis, or was this a banking



c. How did Iceland recover from its 2008–2009 crisis? What are the

important lessons to draw from this case?


d. Iceland did not implement the austerity policies that are so often

associated with IMF loans, and yet the economy recovered. Does this

suggest that austerity policies do not work?