Question 1

Which of the following was the objective of establishing the World Bank?

Accepted Answer

A)  Become the lender of last resort to reserve banks
B)  Promote general economic development
C)  Maintain stability in the international monetary system
D)  Regulate exchange rates of member nationsE) B) and C)
F) B) and D)

Question 2

Which of the following observations is true of the Bretton Woods agreement?

Accepted Answer

A)  All countries participating were required to exchange their currencies for gold.
B)  Devaluation was accepted as a tool of competitive trade policy.
C)  All participating countries agreed to try to maintain the value of their currencies within 10 percent of the par value by buying or selling currencies as needed.
D)  Devaluation of up to 10 percent would be allowed without any formal approval by the IMF.E) A) and B)
F) All of the above

Question 3

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Accepted Answer

A)  By taking opposing positions in the forward foreign exchange market to maintain a zero exposure stance at all points in time
B)  By allowing its exchange rate to fluctuate against other currencies within a target zone
C)  By holding foreign currency reserves equal at the fixed exchange rate to at least 100 percent of the domestic currency issued
D)  By having no separate legal tender of its ownE) All of the above
F) B) and D)

Question 4

Critics of floating exchange rates question the closeness of the link between the exchange rate and the trade balance.They claim trade deficits are determined by the:

Accepted Answer

A)  balance between savings and investment in a country.
B)  external value of the currency of a country.
C)  expansionist monetary policies adopted by a country.
D)  extent of government control of industries in a country.E) A) and D)
F) All of the above

Question 5

Which of the following is a drawback of the currency board system?

Accepted Answer

A)  The ease with which governments can set and manipulate interest rates acts as a dampener.
B)  Higher domestic inflation rates compared to the inflation rate in the country to which the currency is pegged can make the currency uncompetitive.
C)  The currency board can issue additional domestic notes and coins only when there are foreign exchange reserves to back it,thus arresting liquidity.
D)  It has all the disadvantages of a floating exchange rate regime.E) B) and C)
F) A) and D)

Question 6

According to the _____ of 1987,the governments of the Group of Five major industrial nations agreed that exchange rates had been realigned sufficiently and pledged to support the stability of exchange rates around their current levels by intervening in the foreign exchange markets when necessary to buy and sell currency.

Accepted Answer

A)  Doha Accord
B)  Bretton Woods Accord
C)  Plaza Accord
D)  Louvre AccordE) C) and D)
F) None of the above

Question 7

Which of the following is a position taken by advocates of a fixed exchange rate system?

Accepted Answer

A)  Removal of the obligation to maintain exchange rate parity would restore monetary control to a government.
B)  Destabilizing speculation tends to accentuate the fluctuations around the exchange rate's long-run value.
C)  Speculation has negligible impact on foreign exchange rates.
D)  The forward exchange market insures against the risks associated with exchange rate fluctuations.E) A) and C)
F) A) and D)

Question 8

Which of the following was a major factor that led countries such as Great Britain and the United States to finance their deficits by borrowing private money,as opposed to drawing on IMF funds since the early 1970s?

Accepted Answer

A)  The rapid development of global capital markets
B)  Shortage of IMF funds available for disbursal
C)  High interest rate charged by the IMF
D)  Abandoning of the floating exchange rate systemE) A) and B)
F) None of the above

Question 9

Which of the following observations about the International Development Association (IDA) scheme of the World Bank is true?

Accepted Answer

A)  Money is raised through bond sales in the international capital market.
B)  Borrowers have 50 years to repay at an interest rate of 1 percent a year.
C)  Borrowers pay rates slightly lower than commercial banks' market rate.
D)  Loans are offered to governments of all underdeveloped nations.E) C) and D)
F) B) and C)

Question 10

When was the Jamaica Agreement established and for what reason? How did it affect the foreign exchange rate system,and what were its main elements?

Accepted Answer

Following the collapse of the fixed exch...

Question 11

The gold standard was abandoned in:

Accepted Answer

A)  1870.
B)  1889.
C)  1914.
D)  1924.E) A) and B)
F) All of the above

Question 12

Which of the following was a major international institution established by the Bretton Woods conference?

Accepted Answer

A)  General Agreement on Tariffs and Trade
B)  European monetary system
C)  World Trade Organization
D)  International Monetary FundE) A) and B)
F) None of the above

Question 13

In 1997,the currencies of South Korea,Indonesia,Malaysia,and Thailand _____ of their value against the U.S.dollar in a few months.

Accepted Answer

A)  gained between 50 percent and 80 percent
B)  lost between 50 percent and 80 percent
C)  gained between 10 percent and 20 percent
D)  lost between 10 percent and 20 percentE) A) and C)
F) A) and B)

Question 14

Which of the following was abandoned as a reserve asset according to the Jamaica agreement?

Accepted Answer

A)  Silver
B)  U.S.dollar
C)  Gold
D)  A basket of vehicle currenciesE) None of the above
F) A) and B)

Question 15

A country that introduces a _____ commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Accepted Answer

A)  free float system
B)  fixed peg system
C)  managed-float system
D)  currency boardE) A) and B)
F) All of the above

Question 16

Which of the following is a position taken by advocates of a floating exchange rate system?

Accepted Answer

A)  Each country should be allowed to choose its own inflation rate.
B)  Speculation can cause unnecessary fluctuations in exchange rates.
C)  Unpredictability of exchange rate movements has made business planning difficult.
D)  Removal of the obligation to maintain exchange rate parity would destroy a government's monetary control.E) A) and C)
F) None of the above

Question 17

Which term was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Accepted Answer

A)  Competitive disadvantage
B)  Capital flight
C)  Fundamental disequilibrium
D)  NoncompetingE) A) and B)
F) All of the above

Question 18

When the foreign exchange market determines the relative value of a currency,the country is said to adhere to a _____ exchange rate regime.

Accepted Answer

A)  fixed
B)  floating
C)  dirty float
D)  peggedE) None of the above
F) A) and D)

Question 19

Under the gold standard,the amount of currency needed to purchase one ounce of gold was referred to as the gold _____ value.

Accepted Answer

A)  standard
B)  monetary
C)  legal
D)  parE) B) and D)
F) All of the above

Question 20

From mid-2008 through early 2009 the dollar staged a moderate rally against major currencies,despite the fact that the American economy was suffering from a serious financial crisis.Which of the following was seen to be a reason behind this rally?

Accepted Answer

A)  High real interest rates in the United States compared to any other developed region in the world sparked an inflow of funds into the country.
B)  U.S.assets were characterized by a high-risk,high-return payoff which prompted foreign investors to park their funds.
C)  Foreign investors were excited at the possibility of high returns following the government bail-out of financial institutions.
D)  Foreign investors saw the dollar has a safe haven and put their money in low-risk U.S.assets.E) A) and B)
F) A) and C)

Exam 10: The International Monetary System

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Correct Answer
verified

Which of the following was a major factor that led countries such as Great Britain and the United States to finance their deficits by borrowing private money,as opposed to drawing on IMF funds since the early 1970s?

Correct Answer
verified

Which of the following observations is true of the Bretton Woods agreement?

Correct Answer
verified

Which of the following is a drawback of the currency board system?

Correct Answer
verified

In 1997,the currencies of South Korea,Indonesia,Malaysia,and Thailand _____ of their value against the U.S.dollar in a few months.

Correct Answer
verified

From mid-2008 through early 2009 the dollar staged a moderate rally against major currencies,despite the fact that the American economy was suffering from a serious financial crisis.Which of the following was seen to be a reason behind this rally?

Correct Answer
verified

When was the Jamaica Agreement established and for what reason? How did it affect the foreign exchange rate system,and what were its main elements?

Correct Answer
verified
Following the collapse of the fixed exch...
View Answer

When the foreign exchange market determines the relative value of a currency,the country is said to adhere to a _____ exchange rate regime.

Correct Answer
verified

A country that introduces a _____ commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Correct Answer
verified

Which of the following was a major international institution established by the Bretton Woods conference?

Correct Answer
verified

Under the gold standard,the amount of currency needed to purchase one ounce of gold was referred to as the gold _____ value.

Correct Answer
verified

The gold standard was abandoned in:

Correct Answer
verified

Which of the following observations about the International Development Association (IDA) scheme of the World Bank is true?

Correct Answer
verified

Which of the following is a position taken by advocates of a fixed exchange rate system?

Correct Answer
verified

Which of the following is a position taken by advocates of a floating exchange rate system?

Correct Answer
verified

Correct Answer
verified

Which term was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Correct Answer
verified

Critics of floating exchange rates question the closeness of the link between the exchange rate and the trade balance.They claim trade deficits are determined by the:

Correct Answer
verified

Which of the following was the objective of establishing the World Bank?

Correct Answer
verified

Which of the following was abandoned as a reserve asset according to the Jamaica agreement?

Correct Answer
verified

Exam 10: The International Monetary System

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Correct AnswerverifiedShow Answer

Which of the following was a major factor that led countries such as Great Britain and the United States to finance their deficits by borrowing private money,as opposed to drawing on IMF funds since the early 1970s?

Correct AnswerverifiedShow Answer

Which of the following observations is true of the Bretton Woods agreement?

Correct AnswerverifiedShow Answer

Which of the following is a drawback of the currency board system?

Correct AnswerverifiedShow Answer

In 1997,the currencies of South Korea,Indonesia,Malaysia,and Thailand _____ of their value against the U.S.dollar in a few months.

Correct AnswerverifiedShow Answer

From mid-2008 through early 2009 the dollar staged a moderate rally against major currencies,despite the fact that the American economy was suffering from a serious financial crisis.Which of the following was seen to be a reason behind this rally?

Correct AnswerverifiedShow Answer

When was the Jamaica Agreement established and for what reason? How did it affect the foreign exchange rate system,and what were its main elements?

Correct AnswerverifiedFollowing the collapse of the fixed exch...View AnswerShow Answer

When the foreign exchange market determines the relative value of a currency,the country is said to adhere to a _____ exchange rate regime.

Correct AnswerverifiedShow Answer

A country that introduces a _____ commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Correct AnswerverifiedShow Answer

Which of the following was a major international institution established by the Bretton Woods conference?

Correct AnswerverifiedShow Answer

Under the gold standard,the amount of currency needed to purchase one ounce of gold was referred to as the gold _____ value.

Correct AnswerverifiedShow Answer

The gold standard was abandoned in:

Correct AnswerverifiedShow Answer

Which of the following observations about the International Development Association (IDA) scheme of the World Bank is true?

Correct AnswerverifiedShow Answer

Which of the following is a position taken by advocates of a fixed exchange rate system?

Correct AnswerverifiedShow Answer

Which of the following is a position taken by advocates of a floating exchange rate system?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which term was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Correct AnswerverifiedShow Answer

Critics of floating exchange rates question the closeness of the link between the exchange rate and the trade balance.They claim trade deficits are determined by the:

Correct AnswerverifiedShow Answer

Which of the following was the objective of establishing the World Bank?

Correct AnswerverifiedShow Answer

Which of the following was abandoned as a reserve asset according to the Jamaica agreement?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Following the collapse of the fixed exch...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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