Question 1

Managed floats do NOT fall into which of the following categories of central bank intervention?

Accepted Answer

A)   smoothing out daily fluctuations
B)   leaning against the wind
C)   unofficial pegging
D)   letting market forces set exchange ratesE) A) and B)
F) A) and C) D

Question 2

European Monetary System is best described as a

Accepted Answer

A)   clean float
B)   target-zone arrangement
C)   dirty float
D)   managed floatE) All of the above
F) A) and C)

Question 3

gold standard ensures a long?run tendency toward price stability because

Accepted Answer

A)   gold is desirable
B)   gold is durable and storable
C)   the cost of producing an ounce of gold stays relatively constant overtime
D)   gold supply is directly related to consumer satisfactionE) A) and D)
F) B) and D)

Question 4

________ is nonconvertible paper money backed only by faith in the monetary authorities.

Accepted Answer

A)   Specie
B)   Fiat money
C)   Seignorage
D)   Par valueE) A) and B)
F) B) and C)

Question 5

weak peso is most likely to cause

Accepted Answer

A)   added employment and inflation in Mexico
B)   less unemployment but more inflation in Mexico
C)   more unemployment but less inflation in Mexico
D)   less unemployment and less inflation in MexicoE) All of the above
F) A) and B) B

Question 6

Under a fixed-rate system, a country that followed policies leading to a lower inflation rate than that experienced by its trading partners would

Accepted Answer

A)   come under pressure to expand its money supply
B)   restrict the growth of its money supply
C)   experience a balance?of?payments deficit
D)   be forced to buy its currency in the foreign exchange marketE) A) and C)
F) B) and D)

Question 7

government intervention attempts to reduce for exporters and importers the uncertainty caused by disruptive exchange rate changes for the short and medium term, it is referred to as _________.

Accepted Answer

A)   smoothing out daily fluctuations
B)   leaning against the wind
C)   unofficial pegging
D)   a dirty floatE) A) and C)
F) B) and D)

Question 8

Underlying the emerging markets currency crises, there is a fundamental conflict among policy objectives that the target nations have failed to resolve. Which one of the following is NOT in conflict?

Accepted Answer

A)   IMF bailouts
B)   fixed exchange rates
C)   independent domestic monetary policy
D)   free capital movementE) B) and C)
F) A) and D)

Question 9

Governments intervene in the foreign exchange markets for all of the following EXCEPT to

Accepted Answer

A)   earn foreign exchange
B)   reduce economic uncertainty
C)   improve the nation's export competitiveness
D)   reduce inflationE) C) and D)
F) A) and B)

Question 10

fall of the dollar beginning in 1985 can be attributed to

Accepted Answer

A)   the growing U.S. budget deficit
B)   the large U.S. trade deficit
C)   rapid U.S. economic growth
D)   the slowdown in U.S. economic growth relative to growth overseasE) B) and C)
F) A) and D) D

Question 11

Calls for a new gold standard reflect

Accepted Answer

A)   fundamental distrust of government's willingness to maintain the integrity of fiat money
B)   a general willingness to accept fiat money
C)   a short memory of what actually transpired under the gold standard
D)   the durability and desirability of goldE) A) and C)
F) A) and B)

Question 12

________ is an exchange rate system that is relatively free from central bank and other government-type interventions.

Accepted Answer

A)   managed float
B)   clean float
C)   dirty float
D)   target-zone arrangementE) B) and D)
F) A) and C)

Question 13

Under the classic gold standard, if prices began rising in the U.S.

Accepted Answer

A)   the dollar value of the pound would rise
B)   the dollar value of the pound would fall
C)   the U.S. would begin running a balance of trade surplus
D)   gold would flow out of the U.S. and the U.S. money supply would dropE) A) and C)
F) A) and B)

Question 14

current exchange rate system can best be characterized as a _______ system.

Accepted Answer

A)   free float
B)   managed float
C)   target-zone arrangement
D)   fixed-rate
E)   hybridF) B) and C)
G) D) and E)

Question 15

Bretton Woods system fell apart because

Accepted Answer

A)   of the oil crisis
B)   U.S. monetary policy was too expansionary
C)   the United States ran a large trade deficit
D)   the United States no longer supported a pegged gold standardE) All of the above
F) C) and D)

Question 16

Under a _________, countries adjust their national economic policies to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.

Accepted Answer

A)   managed float
B)   'beggar-thy-neighbor" devaluation
C)   dirty float
D)   target-zone agreementE) None of the above
F) A) and C)

Question 17

a fixed-rate system central banks would NOT maintain currency values by

Accepted Answer

A)   increasing the money supplies of nations with overvalued currencies
B)   boosting the money supplies of nations with undervalued currencies
C)   buying up overvalued currencies in the foreign exchange market
D)   selling undervalued currencies in the foreign exchange marketE) A) and B)
F) A) and C)

Question 18

characteristic of gold that is most important to the success of a gold standard is that it is

Accepted Answer

A)   portable
B)   storable
C)   easily standardized
D)   expensive to produce as well as universally acceptableE) A) and C)
F) None of the above

Question 19

order to boost the value of the DM relative to the dollar

Accepted Answer

A)   the Fed should sell dollars for DM and the Bundesbank should buy DM with dollars
B)   the Fed should sell dollars for DM and the Bundesbank should buy dollars with DM
C)   the Fed should sell DM for dollars and the Bundesbank should sell dollars for DM
D)   the Fed should sell DM for dollars and the Bundesbank should buy DM with dollarsE) B) and C)
F) None of the above

Question 20

Under a fixed-rate system, which of the following four alternatives to devaluation is most likely to succeed?

Accepted Answer

A)   foreign borrowing
B)   austerity
C)   wage and price controls
D)   exchange controlsE) None of the above
F) All of the above

Exam 3: The International Monetary System

Managed floats do NOT fall into which of the following categories of central bank intervention?

Correct AnswerverifiedD

European Monetary System is best described as a

Correct AnswerverifiedShow Answer

gold standard ensures a long?run tendency toward price stability because

Correct AnswerverifiedShow Answer

________ is nonconvertible paper money backed only by faith in the monetary authorities.

Correct AnswerverifiedShow Answer

weak peso is most likely to cause

Correct AnswerverifiedB

Under a fixed-rate system, a country that followed policies leading to a lower inflation rate than that experienced by its trading partners would

Correct AnswerverifiedShow Answer

government intervention attempts to reduce for exporters and importers the uncertainty caused by disruptive exchange rate changes for the short and medium term, it is referred to as _________.

Correct AnswerverifiedShow Answer

Underlying the emerging markets currency crises, there is a fundamental conflict among policy objectives that the target nations have failed to resolve. Which one of the following is NOT in conflict?

Correct AnswerverifiedShow Answer

Governments intervene in the foreign exchange markets for all of the following EXCEPT to

Correct AnswerverifiedShow Answer

fall of the dollar beginning in 1985 can be attributed to

Correct AnswerverifiedD

Calls for a new gold standard reflect

Correct AnswerverifiedShow Answer

________ is an exchange rate system that is relatively free from central bank and other government-type interventions.

Correct AnswerverifiedShow Answer

Under the classic gold standard, if prices began rising in the U.S.

Correct AnswerverifiedShow Answer

current exchange rate system can best be characterized as a _______ system.

Correct AnswerverifiedShow Answer

Bretton Woods system fell apart because

Correct AnswerverifiedShow Answer

Under a _________, countries adjust their national economic policies to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.

Correct AnswerverifiedShow Answer

a fixed-rate system central banks would NOT maintain currency values by

Correct AnswerverifiedShow Answer

characteristic of gold that is most important to the success of a gold standard is that it is

Correct AnswerverifiedShow Answer

order to boost the value of the DM relative to the dollar

Correct AnswerverifiedShow Answer

Under a fixed-rate system, which of the following four alternatives to devaluation is most likely to succeed?

Correct AnswerverifiedShow Answer

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

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