Question 1

Which of the following observations is true of the current system of 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 2

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 Bank

Question 3

A country is said to be in balance-of-trade equilibrium when it produces all the goods needed for domestic consumption.

Accepted Answer

A) True 
 B)False

Question 4

How does a fixed exchange rate system work?

Accepted Answer

In a fixed exchange rate system,the valu...

Question 5

The value of U.S dollar increased between 1980 and 1985 despite running a growing trade deficit.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

A foreign debt crisis is a situation in which a country cannot service its foreign debt obligations.

Accepted Answer

A) True 
 B)False

Question 8

A currency crisis occurs due to _____.

Accepted Answer

A)   the loss of confidence in a country's banking system
B)   heavy foreign debt obligations
C)   high levels of trade deficit
D)   a speculative attack on the exchange value

Question 9

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 10

Which of the following arguments is in favor of floating exchange rates?

Accepted Answer

A)   A country's ability to expand or contract its money supply should be limited by the need to maintain exchange rate parity.
B)   Maintaining balance of trade equilibrium is not in the best interest of a country.
C)   Countries can isolate themselves from uncertainties when they trade using a mutually agreed on exchange rate.
D)   Governments can restore monetary control by removing the obligation to maintain exchange rate parity.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Which of the following arguments strengthen the idea of floating exchange rates?

Accepted Answer

A)   External agencies should not interfere in the monetary policies of a country.
B)   Trade deficits can be corrected through changes in exchange rates.
C)   Changes in exchange rates will not impact the trade balance in a country.
D)   Governments should act in ways to minimize the uncertainty in monetary markets.

Question 13

Identify the multinational institutions that were established at the Bretton Woods agreement.What were their roles in the international monetary system?

Accepted Answer

At the Bretton Woods meeting in 1944,two...

Question 14

A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Accepted Answer

A) True 
 B)False

Question 15

Discuss the criticism that IMF is exacerbating a problem called moral hazard.

Accepted Answer

Moral hazard arises when people behave r...

Question 16

Present the common arguments that favor fixed exchange rates.

Accepted Answer

The case for fixed exchange rates revolv...

Question 17

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

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 rates

Question 19

A country's trade balance is in surplus when _____

Accepted Answer

A)   its exports are more than its imports
B)   it experiences negative inflation
C)   its exports equal the imports
D)   the prices of commodities are low in the country

Question 20

Which of the following changes were made to IMF's Articles of Agreement in the Jamaica agreement?

Accepted Answer

A)   IMF members were permitted to use Dollar as the convertible currency.
B)   Gold was declared as a formal reserve asset for IMF members.
C)   IMF members were permitted to sell their gold reserves at the market price.
D)   IMF members were restricted from entering the foreign exchange market.

Exam 11: The International Monetary System

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Present the common arguments that favor fixed exchange rates.

Correct AnswerverifiedThe case for fixed exchange rates revolv...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

Which of the following arguments is in favor of floating exchange rates?

Correct AnswerverifiedShow Answer

Discuss the criticism that IMF is exacerbating a problem called moral hazard.

Correct AnswerverifiedMoral hazard arises when people behave r...View AnswerShow Answer

Which of the following arguments strengthen the idea of floating exchange rates?

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

A foreign debt crisis is a situation in which a country cannot service its foreign debt obligations.

Correct AnswerverifiedShow Answer

Which of the following changes were made to IMF's Articles of Agreement in the Jamaica agreement?

Correct AnswerverifiedShow Answer

A country is said to be in balance-of-trade equilibrium when it produces all the goods needed for domestic consumption.

Correct AnswerverifiedShow Answer

The value of U.S dollar increased between 1980 and 1985 despite running a growing trade deficit.

Correct AnswerverifiedShow Answer

How does a fixed exchange rate system work?

Correct AnswerverifiedIn a fixed exchange rate system,the valu...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country's trade balance is in surplus when _____

Correct AnswerverifiedShow Answer

A currency crisis occurs due to _____.

Correct AnswerverifiedShow Answer

Identify the multinational institutions that were established at the Bretton Woods agreement.What were their roles in the international monetary system?

Correct AnswerverifiedAt the Bretton Woods meeting in 1944,two...View AnswerShow Answer

A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Correct AnswerverifiedShow Answer

Those in favor of floating exchange rate claim that _____.

Correct AnswerverifiedShow Answer

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The case for fixed exchange rates revolv...
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Moral hazard arises when people behave r...
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In a fixed exchange rate system,the valu...
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Correct Answer
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At the Bretton Woods meeting in 1944,two...
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Correct Answer
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Correct Answer
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