Question 1

An advantage of a pegged exchange rate system is that it imposes monetary discipline on a country and leads to low _____.

Accepted Answer

A)   monetary discipline
B)   price inflation
C)   exchange rate predictability
D)   trade surplus
E)   exportsF) A) and B)
G) C) and D)

Question 2

It has been shown that adopting a _____ exchange rate regime moderates inflationary pressures in a country.

Accepted Answer

A)   nominal
B)   pegged
C)   pure "free float"
D)   clean float
E)   realF) A) and C)
G) B) and C)

Question 3

The architects of the Bretton Woods agreement wanted to avoid high unemployment,so they built limited flexibility into the fixed exchange rate system.Which of the following is a major feature of the International Monetary Fund (IMF) Articles of Agreement that fostered this flexibility?

Accepted Answer

A)   Competitive currency devaluations
B)   Lending facilities
C)   Communist ideologies
D)   Floating exchange rates
E)   Unrestricted authority to print currencyF) A) and C)
G) None of the above B

Question 4

Which of the following statements is true about the various exchange rate systems?

Accepted Answer

A)   In a fixed exchange rate system, the value of a currency is adjusted according to the day to day market forces.
B)   In a clean float, the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency.
C)   After the collapse of the Bretton Woods system of floating exchange rates in 1973, the world has operated with a fixed exchange rate system.
D)   According to the Bretton Woods system, the value of most currencies in terms of U.S. dollars was allowed to change only under a specific set of circumstances.
E)   In dirty float, the exchange rate between a currency and other currencies is relatively fixed against a reference currency exchange rate.F) B) and E)
G) None of the above

Question 5

Since March 1973,currency exchange rates have become less volatile and more predictable than they were between 1945 and 1973.

Accepted Answer

A) True 
 B)False

Question 6

Most of the International Monetary Fund's loan activities since the mid-1970s have been targeted toward developing nations typically because:

Accepted Answer

A)   developed nations are not willing to enact certain macroeconomic policies in return for money.
B)   developing nations are more than twice as likely to experience financial crises as developed nations.
C)   it does not have enough funds to lend to large and developed countries.
D)   only developing nations are allowed to be its beneficiaries.
E)   of relatively slow economic growth in the developed countries of Europe.F) A) and D)
G) A) and E)

Question 7

According to the Bretton Woods agreement of 1944,which was the only currency that remained convertible into gold?

Accepted Answer

A)   U.S. dollar
B)   British pound
C)   Japanese yen
D)   German deutsche mark
E)   Chinese yuanF) A) and B)
G) A) and D)

Question 8

Which of the following was the initial mission of the World Bank?

Accepted Answer

A)   Maintaining order in the international monetary system
B)   Financing the building of Europe's economy by providing low-interest loans
C)   Taking over as the successor to the International Monetary Fund
D)   Reviving the gold standard system
E)   Enforcement of the floating exchange rate systemF) A) and B)
G) A) and C)

Question 9

Describe the Jamaica agreement of 1976.What were the main elements of this agreement?

Accepted Answer

The floating exchange rate regime that f...

Question 10

The international monetary system refers to a system to regulate fixed exchange rates before the introduction of the euro.

Accepted Answer

A) True 
 B)False  False

Question 11

The frequency of government intervention in the foreign exchange market explains why the current system is sometimes thought of as a(n) _____.

Accepted Answer

A)   fixed exchange rate system
B)   managed-float system
C)   gold standard system
D)   flexible exchange rate system
E)   pegged exchange rate systemF) B) and E)
G) A) and B)

Question 12

The 1944 Bretton Woods conference created two major international institutions that play a role in the international monetary system-the International Monetary Fund (IMF) and the _____.

Accepted Answer

A)   United Nations
B)   European Union
C)   World Trade Organization
D)   World Bank
E)   G20F) All of the above
G) A) and B) D

Question 13

When the foreign exchange market determines the relative value of a currency,we say that the country is adhering to a pegged exchange rate regime.

Accepted Answer

A) True 
 B)False

Question 14

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 limitation.
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 even when there are no foreign exchange reserves to back it.
D)   The system is a true fixed exchange rate regime, because the domestic currency is fixed against other currencies.
E)   The system lacks commitment to convert domestic currency on demand into another currency.F) A) and D)
G) C) and E)

Question 15

A benefit of the International Monetary Fund is that it does not have a mechanism for accountability.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a common underlying macroeconomic cause of financial crises?

Accepted Answer

A)   Low relative price inflation rates
B)   Narrowing current account deficit
C)   Increases in stock and property prices
D)   Decline in domestic borrowing
E)   Increases in the value of domestic currencyF) A) and D)
G) A) and E)

Question 17

In the face of unpredictable exchange rate movements,a firm should pursue strategies that reduce its economic exposure.

Accepted Answer

A) True 
 B)False

Question 18

In 1971,U.S.trade figures showed that for the first time since 1945,the United States was importing more than it was exporting.This set off massive purchases of _____ in the foreign market by speculators.

Accepted Answer

A)   U.S. dollars
B)   German deutsche marks
C)   British pounds
D)   Japanese yen
E)   Chinese yuanF) All of the above
G) D) and E)

Question 19

Which of the following refers to the institutional arrangements that govern exchange rates?

Accepted Answer

A)   Generally accepted accounting principles
B)   General agreement on tariffs and trade
C)   International monetary system
D)   General agreement on trade in services
E)   Financial management information systemF) None of the above
G) B) and E)

Question 20

Which of the following is being used after the collapse of the fixed exchange rate system established at Bretton Woods?

Accepted Answer

A)   Clean float exchange rate system
B)   Managed-float system
C)   Pegged exchange rate system
D)   Gold standard system
E)   Dirty float systemF) All of the above
G) A) and E)

Exam 11: The International Monetary System

An advantage of a pegged exchange rate system is that it imposes monetary discipline on a country and leads to low _____.

Correct AnswerverifiedShow Answer

It has been shown that adopting a _____ exchange rate regime moderates inflationary pressures in a country.

Correct AnswerverifiedShow Answer

The architects of the Bretton Woods agreement wanted to avoid high unemployment,so they built limited flexibility into the fixed exchange rate system.Which of the following is a major feature of the International Monetary Fund (IMF) Articles of Agreement that fostered this flexibility?

Correct AnswerverifiedB

Which of the following statements is true about the various exchange rate systems?

Correct AnswerverifiedShow Answer

Since March 1973,currency exchange rates have become less volatile and more predictable than they were between 1945 and 1973.

Correct AnswerverifiedShow Answer

Most of the International Monetary Fund's loan activities since the mid-1970s have been targeted toward developing nations typically because:

Correct AnswerverifiedShow Answer

According to the Bretton Woods agreement of 1944,which was the only currency that remained convertible into gold?

Correct AnswerverifiedShow Answer

Which of the following was the initial mission of the World Bank?

Correct AnswerverifiedShow Answer

Describe the Jamaica agreement of 1976.What were the main elements of this agreement?

Correct AnswerverifiedThe floating exchange rate regime that f...View AnswerShow Answer

The international monetary system refers to a system to regulate fixed exchange rates before the introduction of the euro.

Correct AnswerverifiedFalse

The frequency of government intervention in the foreign exchange market explains why the current system is sometimes thought of as a(n) _____.

Correct AnswerverifiedShow Answer

The 1944 Bretton Woods conference created two major international institutions that play a role in the international monetary system-the International Monetary Fund (IMF) and the _____.

Correct AnswerverifiedD

When the foreign exchange market determines the relative value of a currency,we say that the country is adhering to a pegged exchange rate regime.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A benefit of the International Monetary Fund is that it does not have a mechanism for accountability.

Correct AnswerverifiedShow Answer

Which of the following is a common underlying macroeconomic cause of financial crises?

Correct AnswerverifiedShow Answer

In the face of unpredictable exchange rate movements,a firm should pursue strategies that reduce its economic exposure.

Correct AnswerverifiedShow Answer

In 1971,U.S.trade figures showed that for the first time since 1945,the United States was importing more than it was exporting.This set off massive purchases of _____ in the foreign market by speculators.

Correct AnswerverifiedShow Answer

Which of the following refers to the institutional arrangements that govern exchange rates?

Correct AnswerverifiedShow Answer

Which of the following is being used after the collapse of the fixed exchange rate system established at Bretton Woods?

Correct AnswerverifiedShow Answer

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B

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The floating exchange rate regime that f...
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False

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D

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