Question 1

One unit of Maruna's currency (druba) was defined as equivalent to 16 grains of "fine" (pure) gold,while one unit of its neighbor,Rashumba's currency (troon) was defined as equivalent to 24 grains of "fine" (pure) gold.Using the gold par value concept (with 480 grains in an ounce) ,the exchange rate for converting the druba to the troon is

Accepted Answer

A)  1.5 troon = 1 druba.
B)  1 troon = 1 druba.
C)  3 troons = 2 drubas.
D)  1 troon = 1.5 druba.
E)  2 troons = 1 druba.F) A) and B)
G) A) and E)

Question 2

If one ounce of gold cost 20 nerubes (the currency of Nerubia) and the same one ounce costs 40 dringos (the currency of the Republic of Dringo) ,the exchange rate for converting nerubes to dringos is

Accepted Answer

A)  1 nerube = 2 dringos.
B)  2 nerubes = 1 dringo.
C)  2 nerubes = 1.5 dringos.
D)  2 nerubes = 2.5 dringos.
E)  1 nerube = 1 dringo.F) B) and C)
G) B) and E)

Question 3

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) B) and C)
G) A) and C)

Question 4

Explain the concept of a currency board.

Accepted Answer

A country that introduces a currency boa...

Question 5

In January 1976,which one of the followed revised the International Monetary Fund's Articles of Agreement to reflect the new reality of floating exchange rates?

Accepted Answer

A)  Jamaica agreement
B)  Bretton Woods agreement
C)  Marshall Plan
D)  General agreement on Tariffs and Trade
E)  Plaza AccordF) D) and E)
G) C) and D)

Question 6

Under the U.S.macroeconomic policy package of 1965-1968,President Lyndon Johnson backed an increase in U.S.government spending that was financed by an increase in the money supply,resulting in

Accepted Answer

A)  increased exports.
B)  a rise in price inflation.
C)  increased taxes.
D)  a positive trade balance.
E)  an increase in the worth of currency.F) B) and E)
G) C) and D)

Question 7

One argument for a fixed exchange rate system is that

Accepted Answer

A)  governments can contract their money supply without worrying about the need to maintain parity.
B)  trade balance adjustments do not require the intervention of the International Monetary Fund.
C)  it ensures that governments do not expand the monetary supply too rapidly,thus causing high price inflation.
D)  speculations in exchange rates boost exports and reduce imports.
E)  each country should be allowed to choose its own inflation rate.F) A) and C)
G) B) and E)

Question 8

Which of the following was abandoned as per the Jamaica agreement of 1976?

Accepted Answer

A)  floating exchange rate system
B)  U.S.dollar as the reference currency
C)  gold as a reserve asset
D)  membership to the International Monetary Fund
E)  granting International Monetary Fund loans to less developed countriesF) C) and E)
G) A) and E)

Question 9

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...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Differentiate between a floating exchange rate and a pegged exchange rate.

Accepted Answer

When the foreign exchange market determi...

Question 12

A feature of the current monetary system is that

Accepted Answer

A)  it is free from government intervention.
B)  it is free from volatile movements in exchange rates.
C)  it has increased foreign exchange risk for businesses.
D)  it has made it easier to get insurance coverage against exchange rate changes.
E)  instruments like forward market and swaps have lost their importance in the present system.F) C) and D)
G) A) and D)

Question 13

Under the fixed exchange rate system,the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar.

Accepted Answer

A) True 
 B)False

Question 14

An aspect of the Bretton Woods agreement was a commitment not to use

Accepted Answer

A)  the system of fixed exchange rates.
B)  devaluation as a weapon of competitive trade policy.
C)  gold as a measure to fix the value of currencies.
D)  funds from the International Monetary Fund and the World Bank.
E)  the U.S.dollar as a reference currency.F) D) and E)
G) C) and D)

Question 15

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 16

The government of Swoonland is trying to understand the country's financial crisis.Which of the following could have been the underlying macroeconomic cause of Swoonland's 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) C) and D)
G) B) and D)

Question 17

The country of Banoon faces high inflationary pressures and wants to combat that by adopting a new exchange rate system.What kind of an exchange rate system is recommended for Banoon?

Accepted Answer

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

Question 18

What changes have occurred in the International Monetary Fund in recent years?

Accepted Answer

It is notable that in recent years the I...

Question 19

When people behave recklessly because they know they will be saved if things go wrong,it is known as a(n)

Accepted Answer

A)  systemic risk.
B)  moral hazard.
C)  ethical dilemma.
D)  tragedy of the commons.
E)  risk compensation.F) A) and D)
G) A) and C)

Question 20

A political group in the country of Ninook is opposed to the government moving to a floating exchange rate regime.Which of the following arguments for a fixed exchange rate system should the political group use to gain support for its stance?

Accepted Answer

A)  smoother trade balance adjustments
B)  increased destabilizing effects of exchange rate speculation
C)  greater autonomy in terms of monetary policy
D)  higher monetary discipline
E)  greater exchange rate uncertainty and volatilityF) A) and E)
G) C) and D)

Exam 11: The International Monetary System

A political group in the country of Ninook is opposed to the government moving to a floating exchange rate regime.Which of the following arguments for a fixed exchange rate system should the political group use to gain support for its stance?

Correct Answer
verified

The government of Swoonland is trying to understand the country's financial crisis.Which of the following could have been the underlying macroeconomic cause of Swoonland's financial crises?

Correct Answer
verified

Explain the concept of a currency board.

Correct Answer
verified
A country that introduces a currency boa...
View Answer

If one ounce of gold cost 20 nerubes (the currency of Nerubia) and the same one ounce costs 40 dringos (the currency of the Republic of Dringo) ,the exchange rate for converting nerubes to dringos is

Correct Answer
verified

Under the U.S.macroeconomic policy package of 1965-1968,President Lyndon Johnson backed an increase in U.S.government spending that was financed by an increase in the money supply,resulting in

Correct Answer
verified

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

Correct Answer
verified

What changes have occurred in the International Monetary Fund in recent years?

Correct Answer
verified
It is notable that in recent years the I...
View Answer

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

Correct Answer
verified
It is argued that under a fixed system,a...
View Answer

Under the fixed exchange rate system,the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar.

Correct Answer
verified

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

Correct Answer
verified

A feature of the current monetary system is that

Correct Answer
verified

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 Answer
verified

An aspect of the Bretton Woods agreement was a commitment not to use

Correct Answer
verified

Correct Answer
verified

In January 1976,which one of the followed revised the International Monetary Fund's Articles of Agreement to reflect the new reality of floating exchange rates?

Correct Answer
verified

Which of the following was abandoned as per the Jamaica agreement of 1976?

Correct Answer
verified

One argument for a fixed exchange rate system is that

Correct Answer
verified

When people behave recklessly because they know they will be saved if things go wrong,it is known as a(n)

Correct Answer
verified

The country of Banoon faces high inflationary pressures and wants to combat that by adopting a new exchange rate system.What kind of an exchange rate system is recommended for Banoon?

Correct Answer
verified

Differentiate between a floating exchange rate and a pegged exchange rate.

Correct Answer
verified
When the foreign exchange market determi...
View Answer

Exam 11: The International Monetary System

A political group in the country of Ninook is opposed to the government moving to a floating exchange rate regime.Which of the following arguments for a fixed exchange rate system should the political group use to gain support for its stance?

Correct AnswerverifiedShow Answer

The government of Swoonland is trying to understand the country's financial crisis.Which of the following could have been the underlying macroeconomic cause of Swoonland's financial crises?

Correct AnswerverifiedShow Answer

Explain the concept of a currency board.

Correct AnswerverifiedA country that introduces a currency boa...View AnswerShow Answer

If one ounce of gold cost 20 nerubes (the currency of Nerubia) and the same one ounce costs 40 dringos (the currency of the Republic of Dringo) ,the exchange rate for converting nerubes to dringos is

Correct AnswerverifiedShow Answer

Under the U.S.macroeconomic policy package of 1965-1968,President Lyndon Johnson backed an increase in U.S.government spending that was financed by an increase in the money supply,resulting in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What changes have occurred in the International Monetary Fund in recent years?

Correct AnswerverifiedIt is notable that in recent years the I...View AnswerShow 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

Under the fixed exchange rate system,the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A feature of the current monetary system is that

Correct AnswerverifiedShow Answer

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

An aspect of the Bretton Woods agreement was a commitment not to use

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In January 1976,which one of the followed revised the International Monetary Fund's Articles of Agreement to reflect the new reality of floating exchange rates?

Correct AnswerverifiedShow Answer

Which of the following was abandoned as per the Jamaica agreement of 1976?

Correct AnswerverifiedShow Answer

One argument for a fixed exchange rate system is that

Correct AnswerverifiedShow Answer

When people behave recklessly because they know they will be saved if things go wrong,it is known as a(n)

Correct AnswerverifiedShow Answer

The country of Banoon faces high inflationary pressures and wants to combat that by adopting a new exchange rate system.What kind of an exchange rate system is recommended for Banoon?

Correct AnswerverifiedShow Answer

Differentiate between a floating exchange rate and a pegged exchange rate.

Correct AnswerverifiedWhen the foreign exchange market determi...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A country that introduces a currency boa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It is notable that in recent years the I...
View Answer

Correct Answer
verified
It is argued that under a fixed system,a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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
verified
When the foreign exchange market determi...
View Answer