Question 1

What is a currency board? Why do countries choose this type of system? What are the disadvantages of this type of arrangement?

Accepted Answer

A country that introduces a currency boa...

Question 2

Discuss the significance of the Jamaica Agreement.

Accepted Answer

The 1976 Jamaica Agreement formalized th...

Question 3

Firms should not utilize the forward exchange market when they are faced with uncertainty about the future value of currencies.

Accepted Answer

A) True 
 B)False

Question 4

Adopting a pegged exchange rate regime increases the inflationary pressures in a country.

Accepted Answer

A) True 
 B)False

Question 5

In the 1990s, most of the borrowing by the companies who invested in Asian countries had been in _____.

Accepted Answer

A)   Japanese yen
B)   local currencies
C)   Chinese yuan
D)   U.S. dollarsE) B) and C)
F) All of the above

Question 6

A country that introduces a currency board commits itself to converting its domestic currency on demand into:

Accepted Answer

A)   another currency at a fixed exchange rate.
B)   gold or silver at a fixed exchange rate.
C)   gold or silver at a floating exchange rate.
D)   another currency at a floating exchange rate.E) B) and D)
F) A) and C)

Question 7

The United States had large and growing trade deficit between 1980 and 1985. Despite this, the value of U.S. dollar rose during this period. Which of the following is a factor that caused this occurrence?

Accepted Answer

A)   United States attracted heavy inflows of capital from foreign investors during this period.
B)   Banks in the United States offered low interest rates to investors during this period.
C)   Markets across the world witnessed strong economies during this period.
D)   Developed countries in Europe maintained trade equilibrium and supplied goods to underdeveloped countries.E) A) and B)
F) All of the above

Question 8

The International Monetary Fund has been criticized for exacerbating moral hazard:

Accepted Answer

A)   with its rescue programs.
B)   by increasing the probability of debt default.
C)   making loans to countries that are trying to reduce national debt by "playing the market."
D)   by refusing to bail out banks that made loans to overleveraged Asian companies during the 1990s.E) B) and D)
F) All of the above

Question 9

Prior to the introduction of the euro, many EU countries participated in a _____.

Accepted Answer

A)   floating exchange rate system
B)   currency board system
C)   fixed exchange rate system
D)   pegged exchange rate systemE) A) and B)
F) All of the above

Question 10

The monetary autonomy argument is supported by the advocates of _____.

Accepted Answer

A)   a dirty-float system
B)   fixed exchange rates
C)   pegged exchange rates
D)   floating exchange ratesE) B) and C)
F) All of the above

Question 11

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

Accepted Answer

A)   All countries agreed to fix the value of their currency in terms of gold under the agreement.
B)   The system accepted Pound as the official reference currency against gold.
C)   The agreement established a floating system of monetary exchange.
D)   Two multinational institutions, World Economic Forum and WTO, were formed under the agreement.E) None of the above
F) B) and C)

Question 12

What is the Bretton Woods agreement? How was it different from the gold standard?

Accepted Answer

The Bretton Woods agreement, signed in 1...

Question 13

What is gold standard? What was the major advantage of the system?

Accepted Answer

Pegging currencies to gold and guarantee...

Question 14

Which of the following will help a company hedge against currency fluctuations?

Accepted Answer

A)   Finding a large supplier to supply all the raw materials
B)   In-house manufacturing of raw materials
C)   Basing business in a single country
D)   Dispersing production to different geographic locationsE) A) and B)
F) A) and C)

Question 15

The great virtue claimed for a _____ is that it imposes monetary discipline on a country and leads to low inflation.

Accepted Answer

A)   fixed exchange rate
B)   managed-float system
C)   pegged exchange rate
D)   floating exchange rateE) A) and D)
F) B) and C)

Question 16

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

Accepted Answer

A)   currency board exchange
B)   pegged exchange rate
C)   fixed exchange rate
D)   floating exchange rateE) A) and B)
F) B) and D)

Question 17

Under a pegged exchange rate regime, a country:

Accepted Answer

A)   commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.
B)   will peg the value of its currency to that of a major currency.
C)   valuates its currency without attaching it to a reference currency.
D)   follows the foreign exchange market to determine the relative value of a currency.E) B) and C)
F) A) and D)

Question 18

Those in favor of floating exchange rate claim that ____.

Accepted Answer

A)   uncertainty in monetary markets dampens the growth of international trade
B)   inflation is beneficial to a country if it is controlled closely
C)   trade imbalances can be adjusted by using floating exchange rates
D)   governments can have rigid control over monetary markets by using floating ratesE) None of the above
F) All of the above

Question 19

The _____ refers to the institutional arrangements that govern exchange rates.

Accepted Answer

A)   World Bank
B)   international monetary system
C)   currency exchange
D)   gold standardE) C) and D)
F) A) and C)

Question 20

Contracting out manufacturing allows companies to reduce economic exposure because:

Accepted Answer

A)   having multiple suppliers attracts subsidies from government.
B)   it reduces the pressure on them to maintain a trade surplus.
C)   it allows companies to shift suppliers from country to country.
D)   quality issues are insignificant when manufacturing is contracted to others.E) A) and D)
F) A) and C)

Exam 11: The International Monetary System

The International Monetary Fund has been criticized for exacerbating moral hazard:

Correct AnswerverifiedShow Answer

Which of the following will help a company hedge against currency fluctuations?

Correct AnswerverifiedShow Answer

What is a currency board? Why do countries choose this type of system? What are the disadvantages of this type of arrangement?

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

The United States had large and growing trade deficit between 1980 and 1985. Despite this, the value of U.S. dollar rose during this period. Which of the following is a factor that caused this occurrence?

Correct AnswerverifiedShow Answer

Discuss the significance of the Jamaica Agreement.

Correct AnswerverifiedThe 1976 Jamaica Agreement formalized th...View AnswerShow Answer

Contracting out manufacturing allows companies to reduce economic exposure because:

Correct AnswerverifiedShow Answer

Firms should not utilize the forward exchange market when they are faced with uncertainty about the future value of currencies.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country that introduces a currency board commits itself to converting its domestic currency on demand into:

Correct AnswerverifiedShow Answer

Adopting a pegged exchange rate regime increases the inflationary pressures in a country.

Correct AnswerverifiedShow Answer

The _____ refers to the institutional arrangements that govern exchange rates.

Correct AnswerverifiedShow Answer

What is the Bretton Woods agreement? How was it different from the gold standard?

Correct AnswerverifiedThe Bretton Woods agreement, signed in 1...View AnswerShow Answer

What is gold standard? What was the major advantage of the system?

Correct AnswerverifiedPegging currencies to gold and guarantee...View AnswerShow Answer

The monetary autonomy argument is supported by the advocates of _____.

Correct AnswerverifiedShow Answer

Prior to the introduction of the euro, many EU countries participated in a _____.

Correct AnswerverifiedShow Answer

In the 1990s, most of the borrowing by the companies who invested in Asian countries had been in _____.

Correct AnswerverifiedShow Answer

The great virtue claimed for a _____ is that it imposes monetary discipline on a country and leads to low inflation.

Correct AnswerverifiedShow Answer

Those in favor of floating exchange rate claim that ____.

Correct AnswerverifiedShow Answer

Under a pegged exchange rate regime, a country:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct Answer
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Correct Answer
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The 1976 Jamaica Agreement formalized th...
View 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
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Correct Answer
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The Bretton Woods agreement, signed in 1...
View Answer

Correct Answer
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Pegging currencies to gold and guarantee...
View Answer

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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