Question 1

Which of the following poses a problem for international businesses in the long run?

Accepted Answer

A)   Using exchange rate instruments like the forward market and swaps
B)   Volatility of global exchange rate regime
C)   Anti-inflationary monetary policies
D)   Maintaining strategic flexibility by dispersing production to different locations
E)   A policy of reduction in government spendingF) A) and B)
G) None of the above

Question 2

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:

Accepted Answer

A)   the sale of gold reserves.
B)   borrowing from the International Monetary Fund.
C)   an increase in the money supply.
D)   an increase in taxes.
E)   selling bonds in the international capital market.F) B) and E)
G) B) and D)

Question 3

Which of the following is an implication of a currency crisis?

Accepted Answer

A)   It occurs due to a sharp appreciation in the value of a currency.
B)   It forces authorities to block large volumes of international currency reserves.
C)   A country in currency crisis will not be eligible for loans from the International Monetary Fund.
D)   It results in the government sharply increasing interest rates to defend the prevailing exchange rate.
E)   A country in currency crisis will face sharp decreases in stock and property prices.F) A) and B)
G) A) and C)

Question 4

Under a floating exchange rate regime,market forces have produced a volatile dollar exchange rate.

Accepted Answer

A) True 
 B)False

Question 5

Explain the concept of a currency board.

Accepted Answer

A country that introduces a currency boa...

Question 6

Elaborate on the main criticisms of the International Monetary Fund's approach to financial crises.

Accepted Answer

One criticism is that the International ...

Question 7

Which of the following statements is true about the role of the International Monetary Fund?

Accepted Answer

A)   It never interfered in the monetary and fiscal conditions of its member countries.
B)   It was authorized to approve currency devaluations of only up to 10 percent.
C)   It required member countries to adhere to specific agreements irrespective of the amount of funds the countries borrowed.
D)   It lent money under the International Bank for Reconstruction and Development (IBR
D)   scheme and a second scheme which is overseen by the International Development Association (ID
A)  .
E)   It helped deficit-laden countries bring down inflation rates by providing short-term foreign currency loans.F) B) and E)
G) B) and D)

Question 8

Which of the following observations about the International Monetary Fund (IMF) is true?

Accepted Answer

A)   The IMF can force countries to adopt the policies required to correct economic mismanagement.
B)   Internal political problems can affect a government's commitment to taking corrective action in return for an IMF loan.
C)   In recent years, the IMF has begun to make its policies more tight and inflexible.
D)   In response to the global financial crisis of 2008-2009, the IMF began to adopt a "one-size-fits-all" approach to macroeconomic policy.
E)   In recent years, the IMF has begun to urge countries to oppose fiscal stimulus and monetary easing.F) D) and E)
G) C) and E)

Question 9

If more dollars are needed to buy an ounce of gold than before,the implication is that the dollar is worth more.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true about the gold standard?

Accepted Answer

A)   Given a common gold standard, the value of any currency in units of any other currency was easy to determine.
B)   Establishing a gold standard seemed impractical as the volume of international trade expanded in the wake of the Industrial Revolution.
C)   A drawback of the gold standard was that it failed to provide a mechanism for achieving balance-of-trade equilibrium by all countries.
D)   Under the gold standard, when a country has a trade deficit, there will be a net flow of gold from the other countries to that country.
E)   The gold standard refers to the use of gold coins as a medium of exchange between countries involved in international trade.F) B) and E)
G) A) and B)

Question 11

Critics of floating exchange rates claim that trade deficits are determined by the:

Accepted Answer

A)   balance between savings and investment in a country.
B)   external value of the currency of a country.
C)   exchange rates of other currencies.
D)   valuations made by International Monetary Fund and the World Bank.
E)   mechanism of competitive currency devaluation.F) B) and D)
G) C) and E)

Question 12

In a fixed exchange rate system,the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency if it depreciates too rapidly against an important reference currency.

Accepted Answer

A) True 
 B)False

Question 13

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 C)
G) D) and E)

Question 14

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 cri...

Question 15

Which of the following is true of a banking crisis?

Accepted Answer

A)   Individuals and companies withdraw their deposits from banks.
B)   It results in a sharp appreciation in the value of the currency.
C)   It happens due to a decline in domestic borrowing.
D)   It occurs due to asset price deflation.
E)   Banks tend to decrease interest rates during a banking crisis.F) A) and B)
G) A) and C)

Question 16

Which of the following is a reason why Great Britain and the United States could finance their deficits by borrowing private money since the early 1970s?

Accepted Answer

A)   The rapid development of global capital markets
B)   Shortage of International Monetary Fund grants available for disbursal
C)   High interest rate charged by the International Monetary Fund
D)   Establishment of currency boards in these countries
E)   Decline of the Bretton Woods systemF) A) and E)
G) A) and B)

Question 17

According to the _____ in 1944,all countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold.

Accepted Answer

A)   Bretton Woods agreement
B)   Washington Consensus
C)   World Bank treaty
D)   Group of Five treaty
E)   United Nations agreementF) A) and E)
G) C) and D)

Question 18

Given a common gold standard,the value of any currency in units of any other currency (the exchange rate)was easy to determine.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a feature of the current monetary system?

Accepted Answer

A)   It is free from government intervention.
B)   It is free from volatile movements in exchange rates.
C)   It has increased foreign exchange risk for businesses.
D)   It has made it easier to get insurance coverage against exchange rate changes.
E)   Instruments like forward market and swaps have lost their importance in the present system.F) A) and C)
G) A) and B)

Question 20

What was the drawback of the Bretton Woods system?

Accepted Answer

The Bretton Woods system had an Achilles...

Exam 11: The International Monetary System

Which of the following is an implication of a currency crisis?

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:

Correct AnswerverifiedShow Answer

Under a floating exchange rate regime,market forces have produced a volatile dollar exchange rate.

Correct AnswerverifiedShow Answer

Which of the following statements is true about the role of the International Monetary Fund?

Correct AnswerverifiedShow Answer

Which of the following is a feature of the current monetary system?

Correct AnswerverifiedShow Answer

In a fixed exchange rate system,the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency if it depreciates too rapidly against an important reference currency.

Correct AnswerverifiedShow Answer

According to the _____ in 1944,all countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold.

Correct AnswerverifiedShow Answer

What was the drawback of the Bretton Woods system?

Correct AnswerverifiedThe Bretton Woods system had an Achilles...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a reason why Great Britain and the United States could finance their deficits by borrowing private money since the early 1970s?

Correct AnswerverifiedShow Answer

Given a common gold standard,the value of any currency in units of any other currency (the exchange rate)was easy to determine.

Correct AnswerverifiedShow Answer

Which of the following observations about the International Monetary Fund (IMF) is true?

Correct AnswerverifiedShow Answer

Which of the following is true of a banking crisis?

Correct AnswerverifiedShow Answer

Which of the following statements is true about the gold standard?

Correct AnswerverifiedShow Answer

Explain the concept of a currency board.

Correct AnswerverifiedA country that introduces a currency boa...View AnswerShow Answer

Which of the following poses a problem for international businesses in the long run?

Correct AnswerverifiedShow Answer

Critics of floating exchange rates claim that trade deficits are determined by the:

Correct AnswerverifiedShow Answer

If more dollars are needed to buy an ounce of gold than before,the implication is that the dollar is worth more.

Correct AnswerverifiedShow Answer

Elaborate on the main criticisms of the International Monetary Fund's approach to financial crises.

Correct AnswerverifiedOne criticism is that the International ...View AnswerShow Answer

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

Correct AnswerverifiedA number of broad types of financial cri...View AnswerShow Answer

Correct Answer
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The Bretton Woods system had an Achilles...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A country that introduces a currency boa...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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One criticism is that the International ...
View Answer

Correct Answer
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A number of broad types of financial cri...
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