Question 1

According to the agreement reached between the International Monetary Fund and the South Korean government in 1997, in return for funding, the South Koreans were required to

Accepted Answer

A)   adopt communist ideologies.
B)   reduce their imports by enforcing restrictive import licensing.
C)   open their economy to greater foreign competition.
D)   oppose the ideologies of the World Trade Organization.
E)   engage in competitive currency devaluation.F) A) and B)
G) B) and E)

Question 2

How has the volatility of the current global exchange rate regime affected international businesses? How can the problem be tackled?

Accepted Answer

The volatility of the current global exc...

Question 3

Due to a variety of macroeconomic and microeconomic factors, two Eastern European nations suffered permanent adverse shifts in the demand for their manufactured goods. Per the IMF's Articles of Agreement, these nations suffered from

Accepted Answer

A)   a competitive advantage.
B)   capital flight.
C)   a fundamental disequilibrium.
D)   a break-even point.
E)   diseconomies of scale.F) B) and D)
G) B) and C)

Question 4

The cabinet members agreed that it would be best to have the value of their island nation's currency follow that of the U.S. dollar. This is an example of a ________ exchange rate regime.

Accepted Answer

A)   target
B)   pegged
C)   spot
D)   command
E)   free floatF) C) and D)
G) A) and E)

Question 5

What action did President Nixon take to enable devaluation of the dollar during the increase in U.S. inflation in 1971?

Accepted Answer

A)   The IMF member countries would adopt the gold standard to fix exchange rates.
B)   The United States would no longer support the World Bank.
C)   A new 15 percent tax would be charged on U.S. exports.
D)   The dollar would no longer be convertible into gold.
E)   German deutsche marks would be the new reference currency.F) A) and E)
G) D) and E)

Question 6

What is the effect of a monetary contraction in a fixed exchange rate system?

Accepted Answer

A)   It forecasts low interest rates.
B)   It increases the demand for money.
C)   It puts downward pressure on a fixed exchange rate.
D)   It leads to an inflow of money from abroad.
E)   It can lead to high price inflation.F) B) and E)
G) A) and B)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which term was NOT defined in the International Monetary Fund's Articles of Agreement but was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Accepted Answer

A)   competitive disadvantage
B)   capital flight
C)   fundamental disequilibrium
D)   break-even point
E)   diseconomies of scaleF) B) and E)
G) All of the above

Question 9

In the 1930s, countries were devaluing their currencies at will in order to boost exports, thus shattering confidence in the

Accepted Answer

A)   floating exchange rate system.
B)   gold standard system.
C)   fixed exchange system.
D)   Bretton Woods system.
E)   managed-float system.F) All of the above
G) B) and E)

Question 10

What was the result of President Lyndon B. Johnson's attempts to finance his welfare programs?

Accepted Answer

A)   increased exports
B)   a rise in price inflation
C)   increased taxes
D)   a positive trade balance
E)   an increase in the value of the dollarF) None of the above
G) B) and E)

Question 11

The United States returned to the gold standard in 1934 when more dollars were needed to buy an ounce of gold than before. This implied that the dollar

Accepted Answer

A)   was no longer used for pegged rates.
B)   was worth less.
C)   could control the spot exchange rate.
D)   had maintained a steady value.
E)   was worth more.F) A) and E)
G) C) and D)

Question 12

Pegged exchange rates are most popular in larger nations.

Accepted Answer

A) True 
 B)False

Question 13

The activities of the International Monetary Fund have declined after the collapse of the Bretton Woods system in 1973.

Accepted Answer

A) True 
 B)False

Question 14

A South American country has a fixed exchange rate regime. What would be the result if the country rapidly increased its money supply by printing more 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 B)
G) A) and E)

Question 15

A developing country might want to commit itself to converting its domestic currency on demand into another currency at a fixed exchange rate. To do this, it should implement a(n)

Accepted Answer

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

Question 16

According to the critics of the International Monetary Fund (IMF) , how should moral hazards 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) A) and C)
G) B) and E)

Question 17

During the Bretton Woods negotiations, there was a consensus among the countries represented that fixed exchange rates were preferred.

Accepted Answer

A) True 
 B)False

Question 18

What was abandoned 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)   new membership to the International Monetary Fund
E)   granting International Monetary Fund loans to less developed countriesF) None of the above
G) C) and D)

Question 19

It has been shown that countries with pegged exchange rates have a lower annual inflation rate than countries with floating regimes.

Accepted Answer

A) True 
 B)False

Question 20

The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to

Accepted Answer

A)   avoid high unemployment.
B)   facilitate competitive currency devaluations.
C)   widen balance-of-payments gap between countries.
D)   increase money supply and thereby price inflation.
E)   avoid balance-of-trade equilibrium between countries.F) C) and E)
G) A) and B)

Exam 11: The International Monetary System

How has the volatility of the current global exchange rate regime affected international businesses? How can the problem be tackled?

Correct AnswerverifiedThe volatility of the current global exc...View AnswerShow Answer

Which term was NOT defined in the International Monetary Fund's Articles of Agreement but was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Correct AnswerverifiedShow Answer

Due to a variety of macroeconomic and microeconomic factors, two Eastern European nations suffered permanent adverse shifts in the demand for their manufactured goods. Per the IMF's Articles of Agreement, these nations suffered from

Correct AnswerverifiedShow Answer

A developing country might want to commit itself to converting its domestic currency on demand into another currency at a fixed exchange rate. To do this, it should implement a(n)

Correct AnswerverifiedShow Answer

The cabinet members agreed that it would be best to have the value of their island nation's currency follow that of the U.S. dollar. This is an example of a ________ exchange rate regime.

Correct AnswerverifiedShow Answer

The activities of the International Monetary Fund have declined after the collapse of the Bretton Woods system in 1973.

Correct AnswerverifiedShow Answer

The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to

Correct AnswerverifiedShow Answer

What is the effect of a monetary contraction in a fixed exchange rate system?

Correct AnswerverifiedShow Answer

What was the result of President Lyndon B. Johnson's attempts to finance his welfare programs?

Correct AnswerverifiedShow Answer

A South American country has a fixed exchange rate regime. What would be the result if the country rapidly increased its money supply by printing more currency?

Correct AnswerverifiedShow Answer

What was abandoned per the Jamaica agreement of 1976?

Correct AnswerverifiedShow Answer

During the Bretton Woods negotiations, there was a consensus among the countries represented that fixed exchange rates were preferred.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the agreement reached between the International Monetary Fund and the South Korean government in 1997, in return for funding, the South Koreans were required to

Correct AnswerverifiedShow Answer

Pegged exchange rates are most popular in larger nations.

Correct AnswerverifiedShow Answer

It has been shown that countries with pegged exchange rates have a lower annual inflation rate than countries with floating regimes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The United States returned to the gold standard in 1934 when more dollars were needed to buy an ounce of gold than before. This implied that the dollar

Correct AnswerverifiedShow Answer

In the 1930s, countries were devaluing their currencies at will in order to boost exports, thus shattering confidence in the

Correct AnswerverifiedShow Answer

What action did President Nixon take to enable devaluation of the dollar during the increase in U.S. inflation in 1971?

Correct AnswerverifiedShow Answer

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