Question 1

If the IMF agreed that the country's balance of payments was in "fundamental disequilibrium," the system of adjustable parities allowed for the devaluation of a country's currency by more than 10 percent.

Accepted Answer

A) True 
 B)False

Question 2

The fall in the value of the U.S.dollar between 1985 and 1988 was caused by a combination of:

Accepted Answer

A)  government intervention and market forces.
B)  high inflation and high real interest rates in the United States.
C)  a trade surplus in the previous years and high consumer debt.
D)  deregulation and high interest rates.E) A) and C)
F) B) and C)

Question 3

Since the Bretton Woods system of floating exchange rates collapsed in 1973,the world has operated with a fixed exchange rate system.

Accepted Answer

A) True 
 B)False

Question 4

The gold standard worked well from the 1870s until the start of World War II in 1939,when it was abandoned.

Accepted Answer

A) True 
 B)False

Question 5

The system of adjustable parities allowed for the devaluation of a country's currency by more than _____ percent if the IMF agreed that a country's balance of payments was in "fundamental disequilibrium."

Accepted Answer

A)  2
B)  10
C)  5
D)  1E) B) and D)
F) C) and D)

Question 6

The ____ was a system to regulate fixed exchange rates before the introduction of the euro.

Accepted Answer

A)  European Free Trade Association
B)  European Monetary System
C)  International monetary system
D)  European CommunityE) A) and B)
F) A) and D)

Question 7

Which of the following exchange rate regimes is least practiced by IMF member nations?

Accepted Answer

A)  No separate tender
B)  Fixed peg
C)  Managed float
D)  Currency boardE) A) and B)
F) A) and C)

Question 8

Why is the current foreign exchange system thought of as a dirty-float system?

Accepted Answer

A)  Because of the frequency of government intervention in the foreign exchange market
B)  Because of the extreme volatility in the foreign exchange market
C)  Because it is essentially a system of fixed foreign exchange rates
D)  Because of absolute government control of exchange ratesE) None of the above
F) A) and B) A

Question 9

______ arises when people behave recklessly because they know they will be saved if things go wrong.

Accepted Answer

A)  The lemon problem
B)  Moral hazard
C)  Insurance paradigm
D)  Banking paradoxE) B) and C)
F) A) and D)

Question 10

A big bank follows rash lending policies for short-term gains because it knows that it will be bailed out because it is too big to fail.This behavior illustrates:

Accepted Answer

A)  the lemon problem.
B)  information asymmetry.
C)  a moral hazard.
D)  the banking paradox.E) A) and B)
F) A) and C)

Question 11

Which of the following is true of the IBRD scheme of the World Bank?

Accepted Answer

A)  Resources to fund IBRD loans are raised through subscriptions from wealthy members.
B)  IBRD loans go only to the poorest countries.
C)  Borrowers pay the bank's cost of funds plus a margin for expenses.
D)  Borrowers have 50 years to repay at an interest rate of 1 percent a year.E) A) and B)
F) A) and C) C

Question 12

Approximately 14 percent of the IMF's members allow their currency to float freely.

Accepted Answer

A) True 
 B)False

Question 13

The IMF has become a powerful institution with sufficient checks and balances to ensure accountability.

Accepted Answer

A) True 
 B)False

Question 14

The exchange rates for almost all currencies are determined by the free play of market forces.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following helps explain the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?

Accepted Answer

A)  Increased government intervention in the foreign exchange market
B)  Increased foreign investments in U.S.financial assets
C)  Low real interest rates in the U.S.compared to the rest of the world
D)  The fall of the Soviet Union and the communist blocE) A) and B)
F) A) and C)

Question 16

Which of the following actions by the Mexican government in December 1994,exacerbated the sale of the peso and contributed to the rapid 40 percent drop in its value?

Accepted Answer

A)  Increase in interest rates
B)  Currency devaluation
C)  Tax on imports
D)  Shift to a currency board regimeE) A) and D)
F) A) and B)

Question 17

What is the official name for the World Bank?

Accepted Answer

A)  International Bank for Reconstruction and Development (IBR
D)  
B)  International Development Association (ID
A)  
C)  International Monetary Agency (IM
A)  
D)  Bank for International Settlements (BIS) E) C) and D)
F) B) and C)

Question 18

Explain the concept of a currency board.How successful is this system?

Accepted 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.To make this commitment credible,the currency board holds reserves of foreign currency equal at the fixed exchange rate to at least 100 percent of the domestic currency issued.Under this arrangement,the currency board can issue additional domestic notes and coins only when there are foreign exchange reserves to back it.This limits the ability of the government to print money and,thereby,create inflationary pressures.Under a strict currency board system,interest rates adjust automatically.
Since its establishment in 1983,the Hong Kong currency board has weathered several storms.This success persuaded several other countries in the developing world to consider a similar system.Argentina introduced a currency board in 1991 (but abandoned it in 2002)and Bulgaria,Estonia,and Lithuania have all gone down this road in recent years (seven IMF members have currency boards).Economic collapse in Argentina in 2001 and the subsequent decision to abandon its currency board dampened much of the enthusiasm for this mechanism of managing exchange rates.

Question 19

Describe what happened at the 1944 Bretton Woods conference.Are the monetary principles established by the Bretton Woods conference still in effect today?

Accepted Answer

In 1944,at the height of World War II,re...

Question 20

The aim of the Bretton Woods agreement,of which the ____ was the main custodian,was to try to avoid a repetition of the financial chaos of the previous years through a combination of discipline and flexibility.

Accepted Answer

A)  World Bank
B)  WTO
C)  IMF
D)  GATTE) A) and B)
F) A) and D)

Exam 10: The International Monetary System

If the IMF agreed that the country's balance of payments was in "fundamental disequilibrium," the system of adjustable parities allowed for the devaluation of a country's currency by more than 10 percent.

Correct Answer
verified

The fall in the value of the U.S.dollar between 1985 and 1988 was caused by a combination of:

Correct Answer
verified

Since the Bretton Woods system of floating exchange rates collapsed in 1973,the world has operated with a fixed exchange rate system.

Correct Answer
verified

The gold standard worked well from the 1870s until the start of World War II in 1939,when it was abandoned.

Correct Answer
verified

The system of adjustable parities allowed for the devaluation of a country's currency by more than _____ percent if the IMF agreed that a country's balance of payments was in "fundamental disequilibrium."

Correct Answer
verified

The ____ was a system to regulate fixed exchange rates before the introduction of the euro.

Correct Answer
verified

Which of the following exchange rate regimes is least practiced by IMF member nations?

Correct Answer
verified

Why is the current foreign exchange system thought of as a dirty-float system?

Correct Answer
verified
A

______ arises when people behave recklessly because they know they will be saved if things go wrong.

Correct Answer
verified

A big bank follows rash lending policies for short-term gains because it knows that it will be bailed out because it is too big to fail.This behavior illustrates:

Correct Answer
verified

Which of the following is true of the IBRD scheme of the World Bank?

Correct Answer
verified
C

Approximately 14 percent of the IMF's members allow their currency to float freely.

Correct Answer
verified

The IMF has become a powerful institution with sufficient checks and balances to ensure accountability.

Correct Answer
verified

The exchange rates for almost all currencies are determined by the free play of market forces.

Correct Answer
verified

Which of the following helps explain the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?

Correct Answer
verified

Which of the following actions by the Mexican government in December 1994,exacerbated the sale of the peso and contributed to the rapid 40 percent drop in its value?

Correct Answer
verified

What is the official name for the World Bank?

Correct Answer
verified

Explain the concept of a currency board.How successful is this system?

Describe what happened at the 1944 Bretton Woods conference.Are the monetary principles established by the Bretton Woods conference still in effect today?

Correct Answer
verified
In 1944,at the height of World War II,re...
View Answer

The aim of the Bretton Woods agreement,of which the ____ was the main custodian,was to try to avoid a repetition of the financial chaos of the previous years through a combination of discipline and flexibility.

Correct Answer
verified

Exam 10: The International Monetary System

If the IMF agreed that the country's balance of payments was in "fundamental disequilibrium," the system of adjustable parities allowed for the devaluation of a country's currency by more than 10 percent.

Correct AnswerverifiedShow Answer

The fall in the value of the U.S.dollar between 1985 and 1988 was caused by a combination of:

Correct AnswerverifiedShow Answer

Since the Bretton Woods system of floating exchange rates collapsed in 1973,the world has operated with a fixed exchange rate system.

Correct AnswerverifiedShow Answer

The gold standard worked well from the 1870s until the start of World War II in 1939,when it was abandoned.

Correct AnswerverifiedShow Answer

The system of adjustable parities allowed for the devaluation of a country's currency by more than _____ percent if the IMF agreed that a country's balance of payments was in "fundamental disequilibrium."

Correct AnswerverifiedShow Answer

The ____ was a system to regulate fixed exchange rates before the introduction of the euro.

Correct AnswerverifiedShow Answer

Which of the following exchange rate regimes is least practiced by IMF member nations?

Correct AnswerverifiedShow Answer

Why is the current foreign exchange system thought of as a dirty-float system?

Correct AnswerverifiedA

______ arises when people behave recklessly because they know they will be saved if things go wrong.

Correct AnswerverifiedShow Answer

A big bank follows rash lending policies for short-term gains because it knows that it will be bailed out because it is too big to fail.This behavior illustrates:

Correct AnswerverifiedShow Answer

Which of the following is true of the IBRD scheme of the World Bank?

Correct AnswerverifiedC

Approximately 14 percent of the IMF's members allow their currency to float freely.

Correct AnswerverifiedShow Answer

The IMF has become a powerful institution with sufficient checks and balances to ensure accountability.

Correct AnswerverifiedShow Answer

The exchange rates for almost all currencies are determined by the free play of market forces.

Correct AnswerverifiedShow Answer

Which of the following helps explain the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?

Correct AnswerverifiedShow Answer

Which of the following actions by the Mexican government in December 1994,exacerbated the sale of the peso and contributed to the rapid 40 percent drop in its value?

Correct AnswerverifiedShow Answer

What is the official name for the World Bank?

Correct AnswerverifiedShow Answer

Explain the concept of a currency board.How successful is this system?

Describe what happened at the 1944 Bretton Woods conference.Are the monetary principles established by the Bretton Woods conference still in effect today?

Correct AnswerverifiedIn 1944,at the height of World War II,re...View AnswerShow Answer

The aim of the Bretton Woods agreement,of which the ____ was the main custodian,was to try to avoid a repetition of the financial chaos of the previous years through a combination of discipline and flexibility.

Correct AnswerverifiedShow Answer

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A

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C

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In 1944,at the height of World War II,re...
View Answer

Correct Answer
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