Question 1

Increasingly the _____ has been acting as macroeconomic police of the world economy, insisting that countries seeking significant borrowings adopt certain macroeconomic policies.

Accepted Answer

A)   ECOSOC
B)   IMF
C)   UN
D)   World BankE) A) and C)
F) A) and B)

Question 2

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 3

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) A) and C)

Question 4

A currency crisis occurs when investors lose confidence in a country's banking system.

Accepted Answer

A) True 
 B)False

Question 5

Market forces have produced a stable dollar exchange rate under a floating exchange rate regime.

Accepted Answer

A) True 
 B)False

Question 6

The international monetary system refers to the institutional arrangements that govern exchange rates.

Accepted Answer

A) True 
 B)False

Question 7

The monetary autonomy argument is supported by the advocates of fixed exchange rates.

Accepted Answer

A) True 
 B)False

Question 8

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) A) and C)

Question 9

A pegged exchange rate means the value of a currency is fixed relative to a reference currency.

Accepted Answer

A) True 
 B)False

Question 10

Describe the different exchange rate policies that are in practice today.

Accepted Answer

Governments around the world pursue a nu...

Question 11

Which of the following is a disadvantage of using a rigid policy of fixed exchange rates?

Accepted Answer

A)   It is likely to create high unemployment in some cases.
B)   It will lead to inflationary economies across the world.
C)   It is likely to bring about trade wars between nations.
D)   It will instigate competitive devaluations and intense competition.E) C) and D)
F) All of the above

Question 12

The gold standard called for fixed exchange rates against the U.S. dollar.

Accepted Answer

A) True 
 B)False

Question 13

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 othersE) None of the above
F) B) and C)

Question 14

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) B) and C)
F) A) and C)

Question 15

The amount of a currency needed to purchase one ounce of gold was referred to as the gold par value under the gold standard.

Accepted Answer

A) True 
 B)False

Question 16

The monetary autonomy argument holds that ____.

Accepted Answer

A)   each country should be allowed to choose its own inflation rate
B)   inflation is beneficial to a country's economy and growth
C)   inflation is detrimental to a country's economy and growth
D)   countries should restrict inflation based on the global standardsE) A) and B)
F) A) and C)

Question 17

The current system of foreign exchange is a mixed system of government intervention and speculative activity.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is the reason why the current foreign-exchange system is sometimes thought of as a managed-float system?

Accepted Answer

A)   The exchange rates of a currency are determined by market forces.
B)   Governments intervene frequently in the foreign exchange market.
C)   Major currencies are allowed to freely float against each other.
D)   Countries use a reference currency to estimate the value of their currencies.E) All of the above
F) C) and D)

Question 19

Currencies of countries with currency boards will become uncompetitive and overvalued if local inflation rates are lower than the inflation rate in the country to which the currency is pegged.

Accepted Answer

A) True 
 B)False

Question 20

IDA loans receive direct funding from the World Bank.

Accepted Answer

A) True 
 B)False

Exam 11: The International Monetary System

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 amount of a currency needed to purchase one ounce of gold was referred to as the gold par value under the gold standard.

Correct AnswerverifiedShow Answer

Increasingly the _____ has been acting as macroeconomic police of the world economy, insisting that countries seeking significant borrowings adopt certain macroeconomic policies.

Correct AnswerverifiedShow Answer

Market forces have produced a stable dollar exchange rate under a floating exchange rate regime.

Correct AnswerverifiedShow Answer

The monetary autonomy argument holds that ____.

Correct AnswerverifiedShow Answer

The international monetary system refers to the institutional arrangements that govern exchange rates.

Correct AnswerverifiedShow Answer

The gold standard called for fixed exchange rates against the U.S. dollar.

Correct AnswerverifiedShow Answer

Contracting out manufacturing allows companies to reduce economic exposure because ____.

Correct AnswerverifiedShow Answer

Which of the following is the reason why the current foreign-exchange system is sometimes thought of as a managed-float system?

Correct AnswerverifiedShow Answer

The current system of foreign exchange is a mixed system of government intervention and speculative activity.

Correct AnswerverifiedShow Answer

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

Which of the following is a disadvantage of using a rigid policy of fixed exchange rates?

Correct AnswerverifiedShow Answer

A currency crisis occurs when investors lose confidence in a country's banking system.

Correct AnswerverifiedShow Answer

IDA loans receive direct funding from the World Bank.

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

Those in favor of floating exchange rate claim that ____.

Correct AnswerverifiedShow Answer

Currencies of countries with currency boards will become uncompetitive and overvalued if local inflation rates are lower than the inflation rate in the country to which the currency is pegged.

Correct AnswerverifiedShow Answer

Describe the different exchange rate policies that are in practice today.

Correct AnswerverifiedGovernments around the world pursue a nu...View AnswerShow Answer

A pegged exchange rate means the value of a currency is fixed relative to a reference currency.

Correct AnswerverifiedShow Answer

The monetary autonomy argument is supported by the advocates of fixed exchange rates.

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Governments around the world pursue a nu...
View Answer

Correct Answer
verified

Correct Answer
verified