Question 1

Under a currency board system,the government has the absolute authority to set interest rates.

Accepted Answer

A) True 
 B)False

Question 2

The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to:

Accepted Answer

A)   avoid high unemployment.
B)   facilitate competitive currency devaluations.
C)   widen balance-of-payments gap between countries.
D)   increase money supply and thereby price inflation.
E)   avoid balance-of-trade equilibrium between countries.F) A) and E)
G) C) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Under a pegged exchange rate regime,a country will peg the value of its currency to that of a major currency,so that if the reference currency rises in value,its own currency rises too.

Accepted Answer

A) True 
 B)False

Question 5

According to the _____ of 1987,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)   Uruguay round
B)   Bretton Woods system
C)   Marshall plan
D)   Louvre Accord
E)   Jamaica agreementF) A) and D)
G) C) and D)

Question 6

Which of the following is true regarding the implications for international businesses in the present monetary system?

Accepted Answer

A)   In the long run, the monetary policies imposed by the International Monetary Fund on borrowing countries hampers economic growth.
B)   In the short run, the anti-inflationary monetary policies of the International Monetary Fund result in contraction of demand.
C)   Businesses should not use their influence to alter an international monetary system to promote international trade and investment.
D)   Exchange rate volatility such as the world experienced during the 1980s and 1990s creates an environment more conducive to international trade and investment.
E)   It is in the interests of international business to promote an international monetary system that maximizes volatile exchange rate movements.F) B) and D)
G) B) and E)

Question 7

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

Accepted Answer

A)   European Free Trade Association
B)   European Monetary System
C)   international monetary system
D)   International Finance Corporation
E)   European Federation of AccountantsF) All of the above
G) A) and D)

Question 8

_____ refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

Accepted Answer

A)   Fixed exchange rate
B)   Floating exchange rate
C)   Flexible exchange rate
D)   Pegged exchange rate
E)   Nominal exchange rateF) A) and B)
G) None of the above

Question 9

The International Monetary Fund been criticized for:

Accepted Answer

A)   its lack of "one-size-fits-all" approach to macroeconomic policy.
B)   encouraging moral hazard among banks.
C)   its lack of power and authority.
D)   using external experts to gain knowledge about a country.
E)   keeping its operations open to outside scrutiny.F) B) and E)
G) B) and D)

Question 10

Which of the following is a great strength of the gold standard?

Accepted Answer

A)   It helped establish the dollar as a predominant vehicle currency.
B)   It helped governments raise foreign exchange reserves thereby increasing economic stability.
C)   It contained a powerful mechanism for achieving balance-of-trade equilibrium by all countries.
D)   It helped reduce inflation to near-zero levels in all countries engaged in international trade.
E)   It helped to establish a common currency across the globe to fund international trade.F) C) and D)
G) B) and D)

Question 11

Under the Plaza Accord of 1985,the Group of Five major industrial countries concluded that it would be desirable if:

Accepted Answer

A)   the countries returned to a system of fixed exchange rates.
B)   the participating members reverted to the gold standard.
C)   the United States adopted protectionism to improve its trade balance.
D)   most major currencies appreciated vis-à-vis the U.S. dollar.
E)   governments did not regulate the buying and selling of currency.F) A) and E)
G) A) and D)

Question 12

Which of the following was a reason that led to the collapse of the gold standard in 1939?

Accepted Answer

A)   Difficulty and complexity in using the gold standard to determine the exchange rate
B)   Agreement by governments to convert paper currency into gold on demand at a fixed rate
C)   A cycle of competitive currency devaluations by various countries
D)   Expansion in the volume of international trade in the wake of the Industrial Revolution
E)   The inability of the gold standard to act as a mechanism for achieving balance-of-trade equilibrium by all countriesF) B) and E)
G) A) and B)

Question 13

A(n) _____ system refers to an exchange rate system under which a country's exchange rate is allowed to fluctuate against other currencies within a target zone.

Accepted Answer

A)   free float
B)   fixed peg
C)   adjustable peg
D)   pure float
E)   capital floatF) B) and D)
G) B) and E)

Question 14

When the Bretton Woods participants established the World Bank,the need to lend money to third world nations was foremost in their minds.

Accepted Answer

A) True 
 B)False

Question 15

The architects of the Bretton Woods agreement wanted to avoid high unemployment,so they built the fixed exchange rate system to be highly inflexible.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following explains the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?

Accepted Answer

A)   Reduced government intervention in the foreign exchange market
B)   Increased foreign investments in U.S. financial assets
C)   Low real interest rates in the United States compared to the rest of the world
D)   Increased exports as opposed to the imports
E)   Increased communism in the United StatesF) B) and E)
G) A) and B)

Question 17

Which of the following has some aspects of the pre-1973 Bretton Woods exchange rate system?

Accepted Answer

A)   Pure "free float" exchange rate system
B)   Dirty float exchange rate system
C)   Nominal exchange rate system
D)   Pegged exchange rate system
E)   Real exchange rate systemF) B) and E)
G) C) and D)

Question 18

During the 1997 Asian currency crisis,the currency board of _____ maintained the value of its currency against the U.S.dollar.

Accepted Answer

A)   Japan
B)   Taiwan
C)   Hong Kong
D)   Indonesia
E)   ChinaF) A) and B)
G) A) and E)

Question 19

Under the Bretton Woods system,if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy,this would require the:

Accepted Answer

A)   country to import more than it exports.
B)   country to make its exports more expensive.
C)   International Monetary Fund to agree to a currency devaluation.
D)   government to expand monetary supply in the economy.
E)   government to involve in activities that led to exchange rate appreciation.F) D) and E)
G) B) and E)

Question 20

Which of the following statements is true about the changes in the world monetary system since March 1973?

Accepted Answer

A)   The value of the U.S. dollar has never seen a fall ever since.
B)   Exchange rates have become much more volatile.
C)   Exchange rates have become more predictable.
D)   The fixed rate system was adopted to calculate exchange rates.
E)   The European monetary system as an institution has gained more prominence.F) B) and D)
G) B) and C)

Exam 11: The International Monetary System

Which of the following was a reason that led to the collapse of the gold standard in 1939?

Correct Answer
verified

Which of the following statements is true about the changes in the world monetary system since March 1973?

Correct Answer
verified

The International Monetary Fund been criticized for:

Correct Answer
verified

Under a currency board system,the government has the absolute authority to set interest rates.

Correct Answer
verified

Which of the following is true regarding the implications for international businesses in the present monetary system?

Correct Answer
verified

Correct Answer
verified

Under the Plaza Accord of 1985,the Group of Five major industrial countries concluded that it would be desirable if:

Correct Answer
verified

_____ refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

Correct Answer
verified

The architects of the Bretton Woods agreement wanted to avoid high unemployment,so they built the fixed exchange rate system to be highly inflexible.

Correct Answer
verified

Which of the following has some aspects of the pre-1973 Bretton Woods exchange rate system?

Correct Answer
verified

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

Correct Answer
verified

During the 1997 Asian currency crisis,the currency board of _____ maintained the value of its currency against the U.S.dollar.

Correct Answer
verified

Which of the following is a great strength of the gold standard?

Correct Answer
verified

The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to:

Correct Answer
verified

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

Correct Answer
verified

A(n) _____ system refers to an exchange rate system under which a country's exchange rate is allowed to fluctuate against other currencies within a target zone.

Correct Answer
verified

Which of the following explains the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?

Correct Answer
verified

Under a pegged exchange rate regime,a country will peg the value of its currency to that of a major currency,so that if the reference currency rises in value,its own currency rises too.

Correct Answer
verified

When the Bretton Woods participants established the World Bank,the need to lend money to third world nations was foremost in their minds.

Correct Answer
verified

Under the Bretton Woods system,if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy,this would require the:

Correct Answer
verified

Exam 11: The International Monetary System

Which of the following was a reason that led to the collapse of the gold standard in 1939?

Correct AnswerverifiedShow Answer

Which of the following statements is true about the changes in the world monetary system since March 1973?

Correct AnswerverifiedShow Answer

The International Monetary Fund been criticized for:

Correct AnswerverifiedShow Answer

Under a currency board system,the government has the absolute authority to set interest rates.

Correct AnswerverifiedShow Answer

Which of the following is true regarding the implications for international businesses in the present monetary system?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the Plaza Accord of 1985,the Group of Five major industrial countries concluded that it would be desirable if:

Correct AnswerverifiedShow Answer

_____ refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

Correct AnswerverifiedShow Answer

The architects of the Bretton Woods agreement wanted to avoid high unemployment,so they built the fixed exchange rate system to be highly inflexible.

Correct AnswerverifiedShow Answer

Which of the following has some aspects of the pre-1973 Bretton Woods exchange rate system?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During the 1997 Asian currency crisis,the currency board of _____ maintained the value of its currency against the U.S.dollar.

Correct AnswerverifiedShow Answer

Which of the following is a great strength of the gold standard?

Correct AnswerverifiedShow Answer

The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A(n) _____ system refers to an exchange rate system under which a country's exchange rate is allowed to fluctuate against other currencies within a target zone.

Correct AnswerverifiedShow Answer

Which of the following explains the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?

Correct AnswerverifiedShow Answer

Under a pegged exchange rate regime,a country will peg the value of its currency to that of a major currency,so that if the reference currency rises in value,its own currency rises too.

Correct AnswerverifiedShow Answer

When the Bretton Woods participants established the World Bank,the need to lend money to third world nations was foremost in their minds.

Correct AnswerverifiedShow Answer

Under the Bretton Woods system,if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy,this would require the:

Correct AnswerverifiedShow Answer

Correct Answer
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