Question 1

Which of the following statements is true about the changes in the world monetary system since March 1973?

Accepted Answer

A)  The value of the U.S. dollar has never seen a fall ever since.
B)  Exchange rates have become much more volatile.
C)  Exchange rates have 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 D)
G) A) and C)

Question 2

The forward exchange market is an accurate predictor of future exchange rates.

Accepted Answer

A) True 
 B)False

Question 3

In which kind of exchange rate is the value of the currency 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)  Flexible
B)  Pegged
C)  Real
D)  Dirty-float
E)  FloatingF) A) and B)
G) C) and D)

Question 4

In which kind of exchange rate system are the values of a set of currencies set against each other at some mutually agreed on exchange rate?

Accepted Answer

A)  Clean float
B)  Floating
C)  Fixed
D)  Dirty-float
E)  PeggedF) A) and E)
G) C) and D)

Question 5

What can a country introduce if it wants to commit itself to converting its domestic currency on demand into another currency at a fixed exchange rate?

Accepted Answer

A)  A free-float exchange rate system
B)  A clean-float exchange rate system
C)  A pure-float exchange rate system
D)  A currency board
E)  A gold standardF) C) and D)
G) A) and B) D

Question 6

Which of the following was abandoned as per the Jamaica agreement of 1976?

Accepted Answer

A)  Floating exchange rate system
B)  U.S. dollar as the reference currency
C)  Gold as a reserve asset
D)  Membership to the International Monetary Fund
E)  Granting International Monetary Fund loans to less developed countriesF) B) and C)
G) A) and C)

Question 7

Describe the three broad types of financial crises that have occurred in the post-Bretton Woods era.

Accepted Answer

A number of broad types of financial crises have occurred over the past 30 years, many of which have required the involvement of the International Monetary Fund (IMF). A currency crisis occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate. This happened in Brazil in 2002, and the IMF stepped in to help stabilize the value of the Brazilian currency on foreign exchange markets by lending it foreign currency. A banking crisis refers to a loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits. A foreign debt crisis is a situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt. This happened to Greece, Ireland, and Portugal in 2010.

Question 8

Under the International Bank for Reconstruction and Development scheme, the World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is true about the various exchange rate systems?

Accepted Answer

A)  In a fixed exchange rate system, the value of a currency is adjusted according to the day to day market forces.
B)  In a clean float, the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency.
C)  After the collapse of the Bretton Woods system of floating exchange rates in 1973, the world has operated with a fixed exchange rate system.
D)  Under the Bretton Woods system, currency devaluations over 10 percent were allowed only with the approval of the IMF.
E)  In dirty float, the exchange rate between a currency and other currencies is relatively fixed against a reference currency exchange rate.F) B) and E)
G) B) and D)

Question 10

In a floating exchange rate, the relative value of a currency:

Accepted Answer

A)  is more predictable and less volatile.
B)  is determined by market forces.
C)  changes infrequently only under a specific set of circumstances.
D)  is set against other currencies at some mutually agreed on exchange rate.
E)  does not depend on the free play of market forces.F) A) and B)
G) B) and E)

Question 11

Under the fixed exchange rate system, the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar.

Accepted Answer

A) True 
 B)False

Question 12

An aspect of the Bretton Woods agreement was a commitment not to use:

Accepted Answer

A)  the system of fixed exchange rates.
B)  devaluation as a weapon of competitive trade policy.
C)  gold as a measure to fix the value of currencies.
D)  funds from the International Monetary Fund and the World Bank.
E)  the U.S. dollar as a reference currency.F) None of the above
G) A) and D)

Question 13

Under a fixed exchange rate regime, what would be the result if a country rapidly increased its money supply by printing currency?

Accepted Answer

A)  It would lead to an increase in the worth of the currency.
B)  The prices of imports would become more attractive in the country.
C)  The country's goods would be highly competitive in world markets.
D)  Trade surplus in the country would increase.
E)  It would lead to price deflation in the country.F) A) and E)
G) A) and D) B

Question 14

Which one of the following refers to an exchange rate system under which a country's exchange rate is allowed to fluctuate against other currencies within a target zone?

Accepted Answer

A)  Free float
B)  Fixed peg
C)  Adjustable peg
D)  Pure float
E)  Capital floatF) A) and D)
G) C) and D)

Question 15

Which of the following holds true for a pegged exchange rate system?

Accepted Answer

A)  Adopting a pegged exchange rate regime increases inflationary pressures in a country.
B)  It is necessary for a country whose currency is chosen for the peg to pursue a sound monetary policy.
C)  Pegged exchange rates are popular among many of the world's largest and developed nations.
D)  The value of a pegged currency falls when the reference currency rises in value.
E)  It is similar to a floating exchange rate system rather than a fixed system.F) A) and B)
G) A) and E)

Question 16

Under the Plaza Accord of 1985, the Group of Five major industrial countries concluded that it would be desirable if:

Accepted Answer

A)  the countries returned to a system of fixed exchange rates.
B)  the participating members reverted to the gold standard.
C)  the United States adopted protectionism to improve its trade balance.
D)  most major currencies appreciated vis-à-vis the U.S. dollar.
E)  governments did not regulate the buying and selling of currency.F) A) and D)
G) A) and B)

Question 17

Under the U.S. macroeconomic policy package of 1965-1968, President Lyndon Johnson backed an increase in U.S. government spending that was financed by an increase in the money supply, resulting in:

Accepted Answer

A)  increased exports.
B)  a rise in price inflation.
C)  increased taxes.
D)  a positive trade balance.
E)  an increase in the worth of currency.F) A) and E)
G) A) and D)

Question 18

Which of the following statements is true about a currency board system?

Accepted Answer

A)  Under a strict currency board system, interest rates adjust automatically based on the supply and demand of domestic currency.
B)  To convert domestic currency on demand into another currency, a currency board takes grants from the International Monetary Fund.
C)  This system is a true fixed exchange rate regime, because the domestic currency is fixed against other currencies.
D)  A currency board can issue additional domestic currency even when there are no foreign exchange reserves to back it.
E)  A currency board authorizes the government to print money and set interest rates.F) A) and B)
G) C) and D)

Question 19

Which of the following refers to the gold standard?

Accepted Answer

A)  Pegging currencies to gold and guaranteeing convertibility
B)  Conducting international trade by physically exchanging gold
C)  The most valuable currency in the world at any given point in time
D)  The common global standard of gold quality to be maintained
E)  The quality of merchandise to be maintained for it to be exportableF) D) and E)
G) A) and E)

Question 20

According to the critics of the International Monetary Fund (IMF) , how should the problem of moral hazard exhibited by banks be resolved?

Accepted Answer

A)  The IMF should use a "one-size-fits-all" approach to macroeconomic policy.
B)  The IMF should establish a mechanism for accountability.
C)  The IMF should free all banks from the obligation of financial reporting.
D)  The banks should be forced to pay the price for their rash lending policies.
E)  The IMF should bail out the banks whose loans gave rise to financial crises.F) C) and D)
G) A) and D)

Exam 11: The International Monetary System

Which of the following statements is true about the changes in the world monetary system since March 1973?

Correct Answer
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The forward exchange market is an accurate predictor of future exchange rates.

Correct Answer
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In which kind of exchange rate is the value of the currency 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
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In which kind of exchange rate system are the values of a set of currencies set against each other at some mutually agreed on exchange rate?

Correct Answer
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What can a country introduce if it wants to commit itself to converting its domestic currency on demand into another currency at a fixed exchange rate?

Correct Answer
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D

Which of the following was abandoned as per the Jamaica agreement of 1976?

Correct Answer
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Describe the three broad types of financial crises that have occurred in the post-Bretton Woods era.

Under the International Bank for Reconstruction and Development scheme, the World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Correct Answer
verified

Which of the following statements is true about the various exchange rate systems?

Correct Answer
verified

In a floating exchange rate, the relative value of a currency:

Correct Answer
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Under the fixed exchange rate system, the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar.

Correct Answer
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An aspect of the Bretton Woods agreement was a commitment not to use:

Correct Answer
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Under a fixed exchange rate regime, what would be the result if a country rapidly increased its money supply by printing currency?

Correct Answer
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B

Which one of the following refers to an exchange rate system under which a country's exchange rate is allowed to fluctuate against other currencies within a target zone?

Correct Answer
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Which of the following holds true for a pegged exchange rate system?

Correct Answer
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Under the Plaza Accord of 1985, the Group of Five major industrial countries concluded that it would be desirable if:

Correct Answer
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Under the U.S. macroeconomic policy package of 1965-1968, President Lyndon Johnson backed an increase in U.S. government spending that was financed by an increase in the money supply, resulting in:

Correct Answer
verified

Which of the following statements is true about a currency board system?

Correct Answer
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Which of the following refers to the gold standard?

Correct Answer
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According to the critics of the International Monetary Fund (IMF) , how should the problem of moral hazard exhibited by banks be resolved?

Correct Answer
verified

Exam 11: The International Monetary System

Which of the following statements is true about the changes in the world monetary system since March 1973?

Correct AnswerverifiedShow Answer

The forward exchange market is an accurate predictor of future exchange rates.

Correct AnswerverifiedShow Answer

In which kind of exchange rate is the value of the currency 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

In which kind of exchange rate system are the values of a set of currencies set against each other at some mutually agreed on exchange rate?

Correct AnswerverifiedShow Answer

What can a country introduce if it wants to commit itself to converting its domestic currency on demand into another currency at a fixed exchange rate?

Correct AnswerverifiedD

Which of the following was abandoned as per the Jamaica agreement of 1976?

Correct AnswerverifiedShow Answer

Describe the three broad types of financial crises that have occurred in the post-Bretton Woods era.

Under the International Bank for Reconstruction and Development scheme, the World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Correct AnswerverifiedShow Answer

Which of the following statements is true about the various exchange rate systems?

Correct AnswerverifiedShow Answer

In a floating exchange rate, the relative value of a currency:

Correct AnswerverifiedShow Answer

Under the fixed exchange rate system, the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar.

Correct AnswerverifiedShow Answer

An aspect of the Bretton Woods agreement was a commitment not to use:

Correct AnswerverifiedShow Answer

Under a fixed exchange rate regime, what would be the result if a country rapidly increased its money supply by printing currency?

Correct AnswerverifiedB

Which one of the following refers to an exchange rate system under which a country's exchange rate is allowed to fluctuate against other currencies within a target zone?

Correct AnswerverifiedShow Answer

Which of the following holds true for a pegged exchange rate system?

Correct AnswerverifiedShow Answer

Under the Plaza Accord of 1985, the Group of Five major industrial countries concluded that it would be desirable if:

Correct AnswerverifiedShow Answer

Under the U.S. macroeconomic policy package of 1965-1968, President Lyndon Johnson backed an increase in U.S. government spending that was financed by an increase in the money supply, resulting in:

Correct AnswerverifiedShow Answer

Which of the following statements is true about a currency board system?

Correct AnswerverifiedShow Answer

Which of the following refers to the gold standard?

Correct AnswerverifiedShow Answer

According to the critics of the International Monetary Fund (IMF) , how should the problem of moral hazard exhibited by banks be resolved?

Correct AnswerverifiedShow Answer

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D

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B

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