Question 1

One reason for the collapse of the gold standard in 1939 was the

Accepted Answer

A)   difficulty and complexity in using the gold standard to determine the exchange rate.
B)   agreement by governments to convert paper currency into gold on demand at a fixed rate.
C)   cycle of competitive currency devaluations by various countries.
D)   expansion in the volume of international trade after the Industrial Revolution.
E)   inability of the gold standard to act as a mechanism for achieving balance-of-trade equilibrium by all countries.F) D) and E)
G) B) and D)

Question 2

The country of Ambos Republic defined its currency, ambos, as being equivalent to 16 grains of "fine" (pure)  gold. Assuming that there are 480 grains in an ounce, the gold par value of the ambos is

Accepted Answer

A)   30.
B)   28.
C)   20.
D)   22.
E)   14.F) A) and E)
G) B) and D)

Question 3

How was the global monetary system affected by major events in the 1970s, including the OPEC oil crisis in 1971 and the loss of confidence in the U.S. dollar in the late 1970s?

Accepted Answer

A)   The value of the U.S. dollar stabilized.
B)   Exchange rates become much more volatile.
C)   Exchange rates become more predictable.
D)   The fixed rate system was adopted to calculate exchange rates.
E)   The European Monetary System as an institution has gained more prominence.F) A) and C)
G) A) and B)

Question 4

Cissen and Napor are two neighboring countries that actively trade goods and services with each other. Under the gold standard, there will be a net flow of gold from Napor to Cissen when

Accepted Answer

A)   Cissen is in trade deficit with Napor.
B)   Napor is in balance-of-trade equilibrium with Cissen.
C)   Cissen is in trade surplus with Napor.
D)   Cissen imports more than it exports to Napor.
E)   Napor balance of payment to Cissen is favorable.F) A) and D)
G) A) and B)

Question 5

The U.S. balance-of-payments position flourished throughout the 1970s under the guidance of President Nixon.

Accepted Answer

A) True 
 B)False

Question 6

How are interest rates typically affected by a strict currency board system?

Accepted Answer

A)   Interest rates adjust automatically based on the supply and demand of domestic currency.
B)   Developing countries receive lower interest rates.
C)   Interest rates are based on the gold standard and remain steady.
D)   Developed countries are required to pay higher interest rates.
E)   The government is allowed to print money when necessary and charge interest for its use.F) B) and D)
G) C) and D)

Question 7

From mid-2008 through early 2009, the dollar's value moderately increased against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. What caused this phenomenon?

Accepted Answer

A)   High real interest rates in the United States compared to any other developed region in the world sparked an inflow of funds into the country.
B)   U.S. assets were characterized by a high-risk, high-return payoff which prompted foreign investors to park their funds.
C)   Foreign investors were excited at the possibility of high returns following the government bail-out of financial institutions.
D)   Foreign investors put their money in low-risk U.S. assets such as low-yielding U.S. government bonds.
E)   Foreign investors saw opportunities in the United States as the level of indebtedness had begun declining.F) B) and E)
G) A) and B)

Question 8

A newly independent Eastern European nation wants to adopt a floating exchange rate system in order to restore monetary control to its government. Using the monetary autonomy argument, how do this country's ministers justify establishing this system?

Accepted Answer

A)   Each country should be allowed to choose its own inflation rate.
B)   Speculation in exchange rates dampens the growth of international trade and investment.
C)   Unpredictability of exchange rate movements makes business planning difficult.
D)   Variable exchange rates are more receptive to a trade balance.
E)   Trade deficits are determined by the balance between savings and investment in a country, not by the external value of its currency.F) None of the above
G) C) and D)

Question 9

All the major appliance manufacturers within a country realize the industry is in trouble. They decide to cut off ties with all foreign imports and focus only on domestic suppliers as a way to cut costs. They agree that if this doesn't work out, it really doesn't matter because the government will bail out the industry. This is an example of

Accepted Answer

A)   systemic risk.
B)   a moral hazard.
C)   an ethical dilemma.
D)   tragedy of the commons.
E)   risk compensation.F) All of the above
G) None of the above

Question 10

The process of dollarization occurs when a country abandons its own currency and adopts another currency-typically the U.S. dollar.

Accepted Answer

A) True 
 B)False

Question 11

Describe the gold standard and a balance-of-trade equilibrium.

Accepted Answer

Pegging currencies to gold and guarantee...

Question 12

The gold standard was adopted in response to the

Accepted Answer

A)   expansion in the volume of international trade due to the Industrial Revolution.
B)   inability of governments to convert gold into paper currency on demand at a fixed rate.
C)   widening gap between the developed and the developing nations.
D)   failure of the Bretton Woods fixed exchange rate system.
E)   failure of the U.S. dollar to act as a reference currency.F) C) and D)
G) B) and E)

Question 13

In terms of monetary policy autonomy, how does a floating exchange rate system differ from a fixed system?

Accepted Answer

It is argued that under a fixed system, ...

Question 14

Under a floating exchange rate system, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity.

Accepted Answer

A) True 
 B)False

Question 15

The U.S. dollar, EU euro, Japanese yen, and British pound are all free to float against each other, which means their exchange rates never fluctuate.

Accepted Answer

A) True 
 B)False

Question 16

When the Bretton Woods participants established the International Monetary Fund, nations who chose to borrow from the IMF could borrow a limited amount without adhering to any specific agreements.

Accepted Answer

A) True 
 B)False

Question 17

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Accepted Answer

A)   borrowing funds from the International Monetary Fund and the World Bank
B)   maintaining a trade surplus with foreign countries
C)   holding foreign currency reserves equal at the fixed exchange rate to at least 100 percent of the domestic currency issued
D)   importing more goods from foreign countries than it exports
E)   printing foreign currenciesF) B) and C)
G) B) and D)

Question 18

Compare and contrast a currency crisis and a banking crisis.

Accepted Answer

A currency crisis occurs when a speculat...

Question 19

Describe the Jamaica agreement of 1976. What were the main elements of this agreement?

Accepted Answer

The floating exchange rate regime that f...

Question 20

A pegged exchange rate means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Accepted Answer

A) True 
 B)False

Exam 11: The International Monetary System

Compare and contrast a currency crisis and a banking crisis.

Correct Answer
verified
A currency crisis occurs when a speculat...
View Answer

From mid-2008 through early 2009, the dollar's value moderately increased against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. What caused this phenomenon?

Correct Answer
verified

Cissen and Napor are two neighboring countries that actively trade goods and services with each other. Under the gold standard, there will be a net flow of gold from Napor to Cissen when

Correct Answer
verified

How was the global monetary system affected by major events in the 1970s, including the OPEC oil crisis in 1971 and the loss of confidence in the U.S. dollar in the late 1970s?

Correct Answer
verified

Describe the gold standard and a balance-of-trade equilibrium.

Correct Answer
verified
Pegging currencies to gold and guarantee...
View Answer

When the Bretton Woods participants established the International Monetary Fund, nations who chose to borrow from the IMF could borrow a limited amount without adhering to any specific agreements.

Correct Answer
verified

The process of dollarization occurs when a country abandons its own currency and adopts another currency-typically the U.S. dollar.

Correct Answer
verified

The country of Ambos Republic defined its currency, ambos, as being equivalent to 16 grains of "fine" (pure) gold. Assuming that there are 480 grains in an ounce, the gold par value of the ambos is

Correct Answer
verified

The gold standard was adopted in response to the

Correct Answer
verified

A pegged exchange rate means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Correct Answer
verified

One reason for the collapse of the gold standard in 1939 was the

Correct Answer
verified

The U.S. dollar, EU euro, Japanese yen, and British pound are all free to float against each other, which means their exchange rates never fluctuate.

Correct Answer
verified

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Correct Answer
verified

Describe the Jamaica agreement of 1976. What were the main elements of this agreement?

Correct Answer
verified
The floating exchange rate regime that f...
View Answer

Correct Answer
verified

Under a floating exchange rate system, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity.

Correct Answer
verified

The U.S. balance-of-payments position flourished throughout the 1970s under the guidance of President Nixon.

Correct Answer
verified

A newly independent Eastern European nation wants to adopt a floating exchange rate system in order to restore monetary control to its government. Using the monetary autonomy argument, how do this country's ministers justify establishing this system?

Correct Answer
verified

How are interest rates typically affected by a strict currency board system?

Correct Answer
verified

In terms of monetary policy autonomy, how does a floating exchange rate system differ from a fixed system?

Correct Answer
verified
It is argued that under a fixed system, ...
View Answer

Exam 11: The International Monetary System

Compare and contrast a currency crisis and a banking crisis.

Correct AnswerverifiedA currency crisis occurs when a speculat...View AnswerShow Answer

From mid-2008 through early 2009, the dollar's value moderately increased against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. What caused this phenomenon?

Correct AnswerverifiedShow Answer

Cissen and Napor are two neighboring countries that actively trade goods and services with each other. Under the gold standard, there will be a net flow of gold from Napor to Cissen when

Correct AnswerverifiedShow Answer

How was the global monetary system affected by major events in the 1970s, including the OPEC oil crisis in 1971 and the loss of confidence in the U.S. dollar in the late 1970s?

Correct AnswerverifiedShow Answer

Describe the gold standard and a balance-of-trade equilibrium.

Correct AnswerverifiedPegging currencies to gold and guarantee...View AnswerShow Answer

When the Bretton Woods participants established the International Monetary Fund, nations who chose to borrow from the IMF could borrow a limited amount without adhering to any specific agreements.

Correct AnswerverifiedShow Answer

The process of dollarization occurs when a country abandons its own currency and adopts another currency-typically the U.S. dollar.

Correct AnswerverifiedShow Answer

The country of Ambos Republic defined its currency, ambos, as being equivalent to 16 grains of "fine" (pure) gold. Assuming that there are 480 grains in an ounce, the gold par value of the ambos is

Correct AnswerverifiedShow Answer

The gold standard was adopted in response to the

Correct AnswerverifiedShow Answer

A pegged exchange rate means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Correct AnswerverifiedShow Answer

One reason for the collapse of the gold standard in 1939 was the

Correct AnswerverifiedShow Answer

The U.S. dollar, EU euro, Japanese yen, and British pound are all free to float against each other, which means their exchange rates never fluctuate.

Correct AnswerverifiedShow Answer

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Correct AnswerverifiedShow Answer

Describe the Jamaica agreement of 1976. What were the main elements of this agreement?

Correct AnswerverifiedThe floating exchange rate regime that f...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Under a floating exchange rate system, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity.

Correct AnswerverifiedShow Answer

The U.S. balance-of-payments position flourished throughout the 1970s under the guidance of President Nixon.

Correct AnswerverifiedShow Answer

A newly independent Eastern European nation wants to adopt a floating exchange rate system in order to restore monetary control to its government. Using the monetary autonomy argument, how do this country's ministers justify establishing this system?

Correct AnswerverifiedShow Answer

How are interest rates typically affected by a strict currency board system?

Correct AnswerverifiedShow Answer

In terms of monetary policy autonomy, how does a floating exchange rate system differ from a fixed system?

Correct AnswerverifiedIt is argued that under a fixed system, ...View AnswerShow Answer

Correct Answer
verified
A currency crisis occurs when a speculat...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Pegging currencies to gold and guarantee...
View Answer

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
The floating exchange rate regime that f...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It is argued that under a fixed system, ...
View Answer