Question 1

The main cost of European monetary union is

Accepted Answer

A)  the loss of national monetary and exchange rate policy independence.
B)  increased exchange rate uncertainty.
C)  lessened political integration.
D)  none of the above

Question 2

Prior to the 1870s, both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents. Suppose that the dollar was pegged to gold at $30 per ounce, the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver, and the German mark pegged to silver at 1 mark per ounce of silver. What would the exchange rate between the U.S. dollar and German mark be under this system?

Accepted Answer

A)  1 German mark = $2
B)  1 German mark = $0.50
C)  1 German mark = $3
D)  1 German mark = $1

Question 3

Under the Bretton Woods system

Accepted Answer

A)  each country established a par value for its currency in relation to the dollar.
B)  the U.S. dollar was pegged to gold at $35 per ounce.
C)  each country was responsible for maintaining its exchange rate within 1 percent of the adopted par value by buying or selling foreign exchanges as necessary.
D)  all of the above

Question 4

Put the following in correct date order:

Accepted Answer

A)  Jamaica Agreement, Plaza Agreement, Louvre Accord.
B)  Plaza Agreement, Jamaica Agreement, Louvre Accord.
C)  Louvre Accord, Jamaica Agreement, Plaza Agreement.
D)  Jamaica Agreement, Louvre Accord, Plaza Agreement.

Question 5

Since the SDR is a "portfolio" of currencies

Accepted Answer

A)  its value tends to be more stable than the value of any of the individual currencies included in the SDR.
B)  its value tends to be less stable than the value of any of the individual currencies included in the SDR.
C)  its value tends to be as stable as the average of the individual currencies included in the SDR.
D)  none of the above

Question 6

Suppose that the British pound is pegged to gold at £6 per ounce, whereas one ounce of gold is worth €12. Under the gold standard, any misalignment of the exchange rate will be automatically corrected by cross border flows of gold. Calculate the possible gains for buying €1,000, if the British pound becomes undervalued and trades for €1.80. (Assume zero shipping costs) . (Hint: Gold is first purchased using the devalued British pound from the Bank of England, then shipped to France and sold for €1,000 to the Bank of France) .

Accepted Answer

A)  £55.56
B)  £65.56
C)  £75.56
D)  £85.56

Question 7

In the EU, there is a

Accepted Answer

A)  low degree of fiscal integration among EU countries.
B)  high degree of fiscal integration among EU countries.

Question 8

Prior to the Argentine Peso Crisis

Accepted Answer

A)  Argentina had a "dirty float" where the government allowed the exchange rate to float within wide bands.
B)  Argentina had a currency board arrangement with the peso pegged to the U.S. dollar at parity.
C)  the Argentine government defaulted on its international debts.
D)  weakening of the U.S. dollar led the Argentine government to abandon dollarization.

Question 9

An "international" gold standard can be said to exist when

Accepted Answer

A)  gold alone is assured of unrestricted coinage.
B)  there is two-way convertibility between gold and national currencies at stable ratios.
C)  gold may be freely exported or imported.
D)  all of the above

Question 10

The first full-fledged gold standard

Accepted Answer

A)  was not established until 1821 in Great Britain, when notes from the Bank of England were made fully redeemable for gold.
B)  was not established until 1780 in the United States, when notes from the Continental Army were made fully redeemable for gold.
C)  was established in 986 during the Han dynasty in China.
D)  none of the above

Question 11

Under the Bretton Woods system,

Accepted Answer

A)  the U.S. dollar was the only currency that was fully convertible to gold; other currencies were not directly convertible to gold.
B)  all currencies of member states were fully convertible to gold.
C)  all currencies of member states were fully convertible to gold or silver.
D)  none of the above.

Question 12

During the period between World War I and World War II,

Accepted Answer

A)  the major European powers and the U.S. returned to the gold standard and fixed exchange rates.
B)  while most countries abandoned the gold standard during World War I, international trade and investment flourished during the interwar period under a coherent international monetary system.
C)  the U.S. dollar emerged as the dominant world currency, gradually replacing the British pound for the role.
D)  None of the above.

Question 13

Advantages of a fixed exchange rates include

Accepted Answer

A)  reduction in exchange rate risk for businesses.
B)  reduction in transactions costs.
C)  reduction in trading frictions.
D)  all of the above

Question 14

During the 1990s there

Accepted Answer

A)  were three major currency crises.
B)  were two major currency crises.
C)  was only one currency crisis.
D)  were no major currency crises

Question 15

The Bretton Woods system was named after

Accepted Answer

A)  the treasury secretary of the United States in 1945, Bretton Woods.
B)  Bretton Woods, New Hampshire, where the Articles of Agreement of the International Monetary Fund (IMF)  were hammered out.
C)  none of the above.

Question 16

To avoid currency crisis in the face of fully integrated capital markets, a country can have a

Accepted Answer

A)  floating exchange rate.
B)  fixed exchange rate.
C)  fixed exchange rate that adjusts.
D)  a and b can both help to avoid currency crises.

Question 17

The Mexican Peso Crisis was touched off by

Accepted Answer

A)  an unsurprising announcement by the Mexican government to devalue to peso against the dollar by 14 percent.
B)  an unexpected announcement by the Mexican government to devalue to peso against the dollar by 14 percent.
C)  an announcement by the Mexican government to enact a currency board arrangement with the U.S. dollar.
D)  contagion from other Latin American and Asian financial markets.

Question 18

Suppose that Britain pegs the pound to gold at six pounds per ounce, whereas the exchange rate between pounds and U.S. dollars is $5 = £1. What should an ounce of gold be worth in U.S. dollars?

Accepted Answer

A)  $29.40
B)  $30.00
C)  $0.83
D)  $1.20

Question 19

Under a purely flexible exchange rate system

Accepted Answer

A)  supply and demand set the exchange rates.
B)  governments can set the exchange rate by buying or selling reserves.
C)  governments can set exchange rates with fiscal policy.
D)  answers b and c are correct.

Question 20

Under the gold standard, international imbalances of payment will be corrected automatically under the

Accepted Answer

A)  Gresham Exchange Rate regime.
B)  European Monetary System.
C)  Price-specie-flow mechanism.
D)  Bretton Woods Accord.

Exam 2: International Monetary System

An "international" gold standard can be said to exist when

Correct Answer
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The first full-fledged gold standard

Correct Answer
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Under the Bretton Woods system,

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The main cost of European monetary union is

Correct Answer
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During the period between World War I and World War II,

Correct Answer
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In the EU, there is a

Correct Answer
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Advantages of a fixed exchange rates include

Correct Answer
verified

Under the gold standard, international imbalances of payment will be corrected automatically under the

Correct Answer
verified

To avoid currency crisis in the face of fully integrated capital markets, a country can have a

Correct Answer
verified

Suppose that Britain pegs the pound to gold at six pounds per ounce, whereas the exchange rate between pounds and U.S. dollars is $5 = £1. What should an ounce of gold be worth in U.S. dollars?

Correct Answer
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Under a purely flexible exchange rate system

Correct Answer
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Since the SDR is a "portfolio" of currencies

Correct Answer
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During the 1990s there

Correct Answer
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The Mexican Peso Crisis was touched off by

Correct Answer
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Prior to the Argentine Peso Crisis

Correct Answer
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Under the Bretton Woods system

Correct Answer
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The Bretton Woods system was named after

Correct Answer
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Put the following in correct date order:

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Exam 2: International Monetary System

An "international" gold standard can be said to exist when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The first full-fledged gold standard

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the Bretton Woods system,

Correct AnswerverifiedShow Answer

The main cost of European monetary union is

Correct AnswerverifiedShow Answer

During the period between World War I and World War II,

Correct AnswerverifiedShow Answer

In the EU, there is a

Correct AnswerverifiedShow Answer

Advantages of a fixed exchange rates include

Correct AnswerverifiedShow Answer

Under the gold standard, international imbalances of payment will be corrected automatically under the

Correct AnswerverifiedShow Answer

To avoid currency crisis in the face of fully integrated capital markets, a country can have a

Correct AnswerverifiedShow Answer

Suppose that Britain pegs the pound to gold at six pounds per ounce, whereas the exchange rate between pounds and U.S. dollars is $5 = £1. What should an ounce of gold be worth in U.S. dollars?

Correct AnswerverifiedShow Answer

Under a purely flexible exchange rate system

Correct AnswerverifiedShow Answer

Since the SDR is a "portfolio" of currencies

Correct AnswerverifiedShow Answer

During the 1990s there

Correct AnswerverifiedShow Answer

The Mexican Peso Crisis was touched off by

Correct AnswerverifiedShow Answer

Prior to the Argentine Peso Crisis

Correct AnswerverifiedShow Answer

Under the Bretton Woods system

Correct AnswerverifiedShow Answer

The Bretton Woods system was named after

Correct AnswerverifiedShow Answer

Put the following in correct date order:

Correct AnswerverifiedShow Answer

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