Question 1

Which of the following statements is true of the gold standard?

Accepted Answer

A)   Gold standard was adopted only by the smaller nations of the world.
B)   Currencies were pegged to gold under the gold standard.
C)   Convertibility to gold was not guaranteed under the gold standard.
D)   Gold standard was not helpful in maintaining balance-of-trade equilibrium.

Question 2

Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following observations is true of the current system of the foreign exchange market?

Accepted Answer

A)   Most of the currencies can be converted to gold in the current system of foreign exchange.
B)   The current system is driven by fixed exchange rates.
C)   Currencies float freely against others in the current system.
D)   The current system is a combination of government intervention and speculative activity.

Question 4

Which of the following is a factor that initiated the collapse of the fixed exchange rate system?

Accepted Answer

A)   Worsening of Great Britain's balance of trade
B)   Recession in third world countries
C)   Price inflation in Europe
D)   Worsening of U.S. foreign trade position

Question 5

When a country tries to hold the value of their currency within some range against an important reference currency such as the U.S. dollar without adopting a formal pegged rate, it is referred to as a _____.

Accepted Answer

A)   gold standard
B)   pegged float
C)   dirty float
D)   currency peg

Question 6

The fixed exchange rate system established at Bretton Woods failed due to speculative pressures on the U.S. dollar.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)   microeconomic parameters
B)   exchange rates
C)   gross domestic produce
D)   foreign direct investment B

Question 8

Which of the following is an advantage of using the gold standard?

Accepted Answer

A)   The standard makes sure that goods are not priced out from markets due to inflation.
B)   The standard does not require a commitment from nations to maintain its currency's value.
C)   The standard effectively prevents the devaluation of currencies across the world.
D)   The standard contains a powerful mechanism for achieving balance-of-trade equilibrium by all countries.

Question 9

Under a currency board system:

Accepted Answer

A)   inflation rates are maintained at high level.
B)   countries issue domestic notes at will.
C)   interest rates remain constant.
D)   government lacks the ability to set interest rates.

Question 10

Identify the currency that was convertible to gold under the Bretton Woods system.

Accepted Answer

A)   Pound
B)   Yen
C)   Euro
D)   Dollar

Question 11

After World War II, the world's major industrial nations arranged their currencies against each other at a mutually agreed on exchange rate. This is an example of a _____ system.

Accepted Answer

A)   fixed exchange rate
B)   dirty float exchange
C)   pegged exchange rate
D)   floating exchange rate A

Question 12

A country is said to be in balance-of-trade equilibrium when:

Accepted Answer

A)   the income its residents earn from exports is equal to the money its residents pay to other countries for imports.
B)   it produces all the goods needed for domestic consumption.
C)   the income its residents earn from imports is equal to the money its residents pay to other countries for exports.
D)   it produces all the goods needed for exportation.

Question 13

What will happen if a country increases its money supply rapidly under fixed exchange rate regime?

Accepted Answer

A)   Imports will become less attractive in that country.
B)   The country will face negative inflation.
C)   Trade deficit would widen in that country.
D)   The country's products will become more attractive in world markets.

Question 14

An effective business strategy to reduce economic exposure is to contract out high value-added manufacturing.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Present the common arguments that favor fixed exchange rates.

Accepted Answer

The case for fixed exchange rates revolv...

Question 17

A dirty float refers to a situation in which:

Accepted Answer

A)   a set of currencies are fixed against each other at some mutually agreed on exchange rate.
B)   many countries join hands to form a monetary system and an exchange rate.
C)   more than one foreign currency is used as the formal reference for a country's currency.
D)   a country tries to hold its currency against an important reference currency without a formal pegged rate. D

Question 18

Supporters of floating exchange rates:

Accepted Answer

A)   argue that floating rates help adjust trade imbalances.
B)   argue that floating rates lead to a more stable world monetary system.
C)   claim that trade deficits are determined by the balance between savings and investment in a country.
D)   claim that trade deficits are not determined by the external value of currency.

Question 19

The World Bank was established at the at Bretton Woods conference to:

Accepted Answer

A)   establish an international monetary system.
B)   promote general economic development.
C)   establish gold standard across the world.
D)   fund the initiatives of the United Nations.

Question 20

Under a _____ exchange rate regime, a country will attach the value of its currency to that of a major currency.

Accepted Answer

A)   managed-float
B)   pegged
C)   free-float
D)   currency board

Exam 11: The International Monetary System

Which of the following statements is true of the gold standard?

Correct AnswerverifiedShow Answer

Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.

Correct AnswerverifiedShow Answer

Which of the following observations is true of the current system of the foreign exchange market?

Correct AnswerverifiedShow Answer

Which of the following is a factor that initiated the collapse of the fixed exchange rate system?

Correct AnswerverifiedShow Answer

When a country tries to hold the value of their currency within some range against an important reference currency such as the U.S. dollar without adopting a formal pegged rate, it is referred to as a _____.

Correct AnswerverifiedShow Answer

The fixed exchange rate system established at Bretton Woods failed due to speculative pressures on the U.S. dollar.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

Which of the following is an advantage of using the gold standard?

Correct AnswerverifiedShow Answer

Under a currency board system:

Correct AnswerverifiedShow Answer

Identify the currency that was convertible to gold under the Bretton Woods system.

Correct AnswerverifiedShow Answer

After World War II, the world's major industrial nations arranged their currencies against each other at a mutually agreed on exchange rate. This is an example of a _____ system.

Correct AnswerverifiedA

A country is said to be in balance-of-trade equilibrium when:

Correct AnswerverifiedShow Answer

What will happen if a country increases its money supply rapidly under fixed exchange rate regime?

Correct AnswerverifiedShow Answer

An effective business strategy to reduce economic exposure is to contract out high value-added manufacturing.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Present the common arguments that favor fixed exchange rates.

Correct AnswerverifiedThe case for fixed exchange rates revolv...View AnswerShow Answer

A dirty float refers to a situation in which:

Correct AnswerverifiedD

Supporters of floating exchange rates:

Correct AnswerverifiedShow Answer

The World Bank was established at the at Bretton Woods conference to:

Correct AnswerverifiedShow Answer

Under a _____ exchange rate regime, a country will attach the value of its currency to that of a major currency.

Correct AnswerverifiedShow Answer

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B

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A

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The case for fixed exchange rates revolv...
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D

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