Question 1

A _____ means the value of the currency is fixed relative to a reference currency,and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Accepted Answer

A)   flexible exchange rate
B)   pegged exchange rate
C)   real exchange rate
D)   dirty float exchange rate
E)   floating exchange rateF) D) and E)
G) None of the above

Question 2

It is most appropriate for a firm to contract out manufacturing when:

Accepted Answer

A)   individual manufacturers have few firm-specific skills that contribute to the value of their product.
B)   the value of the host country currency is expected to appreciate.
C)   supplier switching costs are correspondingly high.
D)   firm-specific technology and expertise add significant value to the product.
E)   the currency used for pricing a product is anticipated to stay weak in the long run.F) C) and E)
G) A) and B)

Question 3

All International Monetary Fund (IMF) loan packages come with conditions attached.Which of the following is prevented due to these policies of the IMF?

Accepted Answer

A)   Trade liberalization
B)   Elimination of restrictive import licensing
C)   Excessive government spending and debt
D)   Privatization of state-owned assets
E)   Deregulation of the economy to increase competitionF) A) and E)
G) B) and C)

Question 4

In the context of the 1997 Asian crisis,how did the International Monetary Fund's "one-size-fits-all" approach to macroeconomic policy affect South Korea?

Accepted Answer

A)   It led to a decrease in the interest rates of short-term loans.
B)   It made it difficult for companies to service their excessive short-term debt obligations.
C)   It decreased the probability of widespread corporate defaults.
D)   South Korea failed to recover from its financial crises.
E)   South Korea was forced to increase restrictions on foreign direct investment.F) C) and D)
G) C) and E)

Question 5

At times,elements of currency,banking,and debt crises may be present simultaneously in a region.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   gold to bond ratio
B)   gold reserve ratio
C)   gold mix ratio
D)   gold par value
E)   gold net valueF) A) and E)
G) A) and B)

Question 7

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 exchange rate system
B)   clean float exchange rate system
C)   pure float exchange rate system
D)   currency board
E)   gold standardF) A) and E)
G) B) and E)

Question 8

Under the International Bank for Reconstruction and Development scheme,the World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Accepted Answer

A) True 
 B)False

Question 9

The values of a set of currencies are set against each other at some mutually agreed on exchange rate in a _____ exchange rate system.

Accepted Answer

A)   clean float
B)   floating
C)   fixed
D)   dirty float
E)   peggedF) None of the above
G) B) and C)

Question 10

Under the Bretton Woods system,if a country developed a permanent deficit in its balance of trade,it would require the International Monetary Fund to agree to a currency devaluation.

Accepted Answer

A) True 
 B)False

Question 11

The International Monetary Fund programs have been counterproductive,or only had limited success in _____.

Accepted Answer

A)   Turkey
B)   Iceland
C)   Greece
D)   Ireland
E)   LatviaF) D) and E)
G) B) and E)

Question 12

A country is said to be in balance-of-trade equilibrium when the income its residents earn from exports is greater than the money its residents pay to other countries for imports.

Accepted Answer

A) True 
 B)False

Question 13

Since the early 1970s,developed countries such as Great Britain and the United States have financed their trade deficits by:

Accepted Answer

A)   borrowing from the World Bank.
B)   borrowing private money.
C)   selling their gold reserves.
D)   drawing on grants from the International Monetary Fund.
E)   increasing their imports.F) B) and D)
G) A) and E)

Question 14

According to the noted economist Jeffrey Sachs,the International Monetary Fund should:

Accepted Answer

A)   not be accountable to anyone as it is a powerful institution.
B)   bail out the banks that have rash lending policies.
C)   have a "one-size-fits-all" approach to macroeconomic policy.
D)   keep its operations open to greater outside scrutiny.
E)   lend only to countries with safe credit ratings.F) A) and E)
G) D) and E)

Question 15

Which of the following is true according to the provisions of the Marshall plan?

Accepted Answer

A)   The United States lent money directly to European nations to help them rebuild their economies.
B)   Member countries of the International Monetary Fund were free to engage in competitive currency devaluations.
C)   The World Bank lent funds to reconstruct the war-torn economies of Europe.
D)   Money was lent to European countries under the International Bank for Reconstruction and Development scheme and the International Development Association scheme.
E)   The World Bank lent money to the International Monetary Fund so that it could finance deficit-laden countries.F) B) and E)
G) A) and D)

Question 16

Which of the following is a characteristic of the floating exchange rate regime?

Accepted Answer

A)   It allows for automatic trade balance adjustments.
B)   The use of monetary policy by the government is restricted.
C)   It allows for greater monetary discipline.
D)   It limits the destabilizing effects of exchange rate speculation.
E)   It eliminates volatility and uncertainty associated with exchange rates.F) A) and D)
G) D) and E)

Question 17

The disadvantage of a pegged exchange rate regime is that it aggravates inflationary pressures in a country.

Accepted Answer

A) True 
 B)False

Question 18

In response to the global financial crisis of 2008-2009,the International Monetary Fund began to:

Accepted Answer

A)   exercise tight controls on fiscal policy of the borrowing countries.
B)   encourage activities that resulted in high inflation rates.
C)   display inflexibility in policy responses.
D)   urge countries to adopt policies that included fiscal stimulus and monetary easing.
E)   adopt a "one-size-fits-all" approach to macroeconomic policy.F) C) and D)
G) B) and C)

Question 19

A _____ refers to a system under which some currencies are allowed to float freely,but the majority are either managed by government intervention or pegged to another currency.

Accepted Answer

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

Question 20

In terms of monetary policy autonomy,how does a floating exchange rate system differ from a fixed system?

Accepted Answer

It is argued that under a fixed system,a...

Exam 11: The International Monetary System

Which of the following is true according to the provisions of the Marshall plan?

Correct AnswerverifiedShow Answer

Under the International Bank for Reconstruction and Development scheme,the World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Correct AnswerverifiedShow Answer

The disadvantage of a pegged exchange rate regime is that it aggravates inflationary pressures in a country.

Correct AnswerverifiedShow Answer

In terms of monetary policy autonomy,how does a floating exchange rate system differ from a fixed system?

Correct AnswerverifiedIt is argued that under a fixed system,a...View AnswerShow Answer

A country is said to be in balance-of-trade equilibrium when the income its residents earn from exports is greater than the money its residents pay to other countries for imports.

Correct AnswerverifiedShow Answer

It is most appropriate for a firm to contract out manufacturing when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The values of a set of currencies are set against each other at some mutually agreed on exchange rate in a _____ exchange rate system.

Correct AnswerverifiedShow Answer

Under the Bretton Woods system,if a country developed a permanent deficit in its balance of trade,it would require the International Monetary Fund to agree to a currency devaluation.

Correct AnswerverifiedShow Answer

At times,elements of currency,banking,and debt crises may be present simultaneously in a region.

Correct AnswerverifiedShow Answer

A _____ means the value of the currency is fixed relative to a reference currency,and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Correct AnswerverifiedShow Answer

A _____ refers to a system under which some currencies are allowed to float freely,but the majority are either managed by government intervention or pegged to another currency.

Correct AnswerverifiedShow Answer

In the context of the 1997 Asian crisis,how did the International Monetary Fund's "one-size-fits-all" approach to macroeconomic policy affect South Korea?

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of the floating exchange rate regime?

Correct AnswerverifiedShow Answer

All International Monetary Fund (IMF) loan packages come with conditions attached.Which of the following is prevented due to these policies of the IMF?

Correct AnswerverifiedShow Answer

According to the noted economist Jeffrey Sachs,the International Monetary Fund should:

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

Since the early 1970s,developed countries such as Great Britain and the United States have financed their trade deficits by:

Correct AnswerverifiedShow Answer

The International Monetary Fund programs have been counterproductive,or only had limited success in _____.

Correct AnswerverifiedShow Answer

In response to the global financial crisis of 2008-2009,the International Monetary Fund began to:

Correct AnswerverifiedShow Answer

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It is argued that under a fixed system,a...
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