Question 1

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 2

When the country of Broost suffered from a "fundamental disequilibrium," its government choose not to devalue its currency.A likely consequence of this would be

Accepted Answer

A)  a persistent trade surplus.
B)  a balance-of-payments equilibrium.
C)  an increase in exports.
D)  high unemployment.
E)  deflation.F) A) and E)
G) D) and E)

Question 3

Contracting out manufacturing may be more appropriate for high-value-added manufacturing.

Accepted Answer

A) True 
 B)False

Question 4

All International Monetary Fund (IMF) loan packages come with conditions attached.Which of the following is prevented due to these policies of the IMF?

Accepted Answer

A)  trade liberalization
B)  elimination of restrictive import licensing
C)  excessive government spending and debt
D)  privatization of state-owned assets
E)  deregulation of the economy to increase competitionF) B) and D)
G) B) and C)

Question 5

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

Accepted Answer

A)  economic growth in the developed countries of Europe.
B)  a fall in prices of exported U.S.goods.
C)  a trade surplus in the United States during the previous years.
D)  a combination of government intervention and market forces.
E)  the protectionism measures adopted by European countries.F) A) and D)
G) B) and D)

Question 6

How does the International Monetary Fund (IMF) provide loans to deficit-laden countries?

Accepted Answer

A)  It prints the required currencies,thereby increasing money supply in those countries.
B)  It acts as a market,buying goods from these countries and selling them to developed countries.
C)  A pool of gold and currencies contributed by its members provides the resources for lending operations.
D)  The World Bank lends the required amount to the IMF at a low interest rate.
E)  It collects money from those countries that wish to devaluate their currencies.F) B) and E)
G) B) and D)

Question 7

Under the gold standard,a country in balance-of-trade equilibrium will experience a net inflow of gold from other countries.

Accepted Answer

A) True 
 B)False

Question 8

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) B) and C)
G) B) and E)

Question 9

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) None of the above
G) A) and B)

Question 10

In the context of the 1997 Asian crisis,how did the International Monetary Fund's "one-size-fits-all" approach to macroeconomic policy affect South Korea?

Accepted Answer

A)  It led to a decrease in the interest rates of short-term loans.
B)  It made it difficult for companies to service their excessive short-term debt obligations.
C)  It decreased the probability of widespread corporate defaults.
D)  South Korea failed to recover from its financial crises.
E)  South Korea was forced to increase restrictions on foreign direct investment.F) B) and D)
G) A) and B)

Question 11

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) None of the above
G) B) and C)

Question 12

In terms of speculation,describe the arguments for a fixed exchange rate system.

Accepted Answer

Critics of a floating exchange rate regi...

Question 13

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 14

Which of the following was responsible for the World Bank shifting its focus from Europe to third-world nations?

Accepted Answer

A)  Great Depression
B)  Jamaica agreement
C)  World War II
D)  Marshall Plan
E)  Bretton Woods agreementF) B) and E)
G) C) and D)

Question 15

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)  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 B)
G) None of the above

Question 16

Briefly describe the Bretton Woods agreement of 1944.

Accepted Answer

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

Question 17

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 the 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 C)
G) A) and B)

Question 18

Which of the following was the weakness of the Bretton Woods system?

Accepted Answer

A)  It could be wrecked by heavy borrowings from the World Bank and the International Monetary Fund.
B)  It could not work if the U.S.dollar was under speculative attack.
C)  The inflexibility of the system resulted in high unemployment.
D)  It forced fiscal and monetary discipline on participating nations.
E)  It allowed the countries to engage in competitive currency devaluations.F) A) and E)
G) A) and B)

Question 19

The government of Darnia allows its currency to nominally float freely against other currencies,but the government has the right to intervene,buying and selling currency,if it believes that the currency has deviated too far from its fair value.What Darnia is doing is called a _____ float.

Accepted Answer

A)  fixed
B)  clean
C)  pegged
D)  dirty
E)  capitalF) A) and D)
G) A) and E)

Question 20

Most of the International Monetary Fund's loan activities since the mid-1970s have been targeted toward developing nations typically because

Accepted Answer

A)  developed nations are not willing to enact certain macroeconomic policies in return for money.
B)  developing nations are more than twice as likely to experience financial crises as developed nations.
C)  it does not have enough funds to lend to large and developed countries.
D)  only developing nations are allowed to be its beneficiaries.
E)  of relatively slow economic growth in the developed countries of Europe.F) A) and E)
G) C) and D)

Exam 11: The International Monetary System

When the country of Broost suffered from a "fundamental disequilibrium," its government choose not to devalue its currency.A likely consequence of this would be

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

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

Most of the International Monetary Fund's loan activities since the mid-1970s have been targeted toward developing nations typically because

Correct AnswerverifiedShow Answer

Which of the following was responsible for the World Bank shifting its focus from Europe to third-world nations?

Correct AnswerverifiedShow Answer

Which of the following refers to the gold standard?

Correct AnswerverifiedShow Answer

The government of Darnia allows its currency to nominally float freely against other currencies,but the government has the right to intervene,buying and selling currency,if it believes that the currency has deviated too far from its fair value.What Darnia is doing is called a _____ float.

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

Which of the following was the weakness of the Bretton Woods system?

Correct AnswerverifiedShow Answer

Briefly describe the Bretton Woods agreement of 1944.

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

How does the International Monetary Fund (IMF) provide loans to deficit-laden countries?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In terms of speculation,describe the arguments for a fixed exchange rate system.

Correct AnswerverifiedCritics of a floating exchange rate regi...View AnswerShow Answer

Contracting out manufacturing may be more appropriate for high-value-added manufacturing.

Correct AnswerverifiedShow Answer

All International Monetary Fund (IMF) loan packages come with conditions attached.Which of the following is prevented due to these policies of the IMF?

Correct AnswerverifiedShow Answer

Under the gold standard,a country in balance-of-trade equilibrium will experience a net inflow of gold from other countries.

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

In the context of the 1997 Asian crisis,how did the International Monetary Fund's "one-size-fits-all" approach to macroeconomic policy affect South Korea?

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

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A number of broad types of financial cri...
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The volatility of the current global exc...
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In 1944,at the height of World War II,re...
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Critics of a floating exchange rate regi...
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