A) Start with $350.Buy 10 ounces of gold with dollars at $35 per ounce.Convert the gold to £200 at £20 per ounce.Exchange the £200 for dollars at the current rate of $1.80 per pound to get $360.
B) Start with $350.Exchange the dollars for pounds at the current rate of $1.80 per pound.Buy gold with pounds at £20 per ounce.Convert the gold to dollars at $35 per ounce.
C) a) and b) both work
D) None of the above
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A) 1 German mark = $2
B) 1 German mark = $0.50
C) 1 German mark = $3
D) 1 German mark = $1
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A) reduction in exchange rate risk for businesses.
B) reduction in transactions costs.
C) reduction in trading frictions.
D) all of the above
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A) in perpetuity.
B) only for as long as the market believes that it has the political will to do so.
C) only for as long as it has reserves of gold.
D) only for as long as it has independence of monetary policy.
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A) the metal with a commercial value lower than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law) .
B) the metal with a commercial value higher than the currency value tends to be used as money (Gresham's Law) .
C) the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law) .
D) none of the above
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A) 1984
B) 1991
C) 1999
D) 2001
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A) was encouraged by U.S.legislation designed to stem the outflow of dollars from the U.S.
B) was discouraged by U.S.legislation designed to stem the outflow of dollars from the U.S.
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A) Greece
B) Italy
C) Sweden
D) Portugal
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A) bad money drives good money out of circulation.
B) good money drives bad money out of circulation.
C) if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate.
D) none of the above.
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A) it became clear that the dollar was undervalued.
B) it became clear that the dollar was overvalued.
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A) international payments are made.
B) movement of capital is accommodated.
C) exchange rates among currencies are determined.
D) all of the above
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A) an artificial international reserve allotted to the members of the International Monetary Fund (IMF) , who can then use it for transactions among themselves or with the IMF.
B) a "portfolio" of currencies, and its value tends to be more stable than the currencies that it is comprised of.
C) used in addition to gold and foreign exchanges, to make international payments.
D) all of the above
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A) the procedure by which ERM member countries collectively manage their exchange rates.
B) based on a "parity-grid" system, which is a system of par values among ERM countries.
C) a and b
D) none of the above
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A) it is perhaps the first serious international financial crisis touched off by cross-border flight of portfolio capital.
B) selling by international portfolio managers had a highly destabilizing, contagious effect on the world financial system.
C) it provides a cautionary tale that as the world's financial markets are becoming more integrated, this type of contagious financial crisis is likely to occur more often.
D) all of the above.
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A) Gresham Exchange Rate regime.
B) European Monetary System.
C) Price-specie-flow mechanism.
D) Bretton Woods Accord.
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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.
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A) decrease the cost of foreign borrowing in the U.S.bond market.
B) increase the cost of foreign borrowing in the U.S.bond market.
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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.
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A) in the January 1976 Jamaica Agreement.
B) in the 1971 Smithsonian Agreement.
C) in the 1944 Bretton Woods Agreement.
D) none of the above
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A) irrevocably fixed exchange rates among the member currencies.
B) commits the members of the European Union to political union as well as monetary union.
C) was signed and subsequently ratified by the 12 member states.
D) all of the above
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