Question 1

The world's four major trading currencies, the Japanese yen, the U.S. dollar, the British pound, and the European Union's euro are all free to float against each other. What is this an example of?

Accepted Answer

A)   pegged exchange rate regime
B)   floating exchange rate regime
C)   managed-float system
D)   fixed exchange rate regimeE) C) and D)
F) B) and C)

Question 2

Which of the following is a characteristic of a foreign debt crisis?

Accepted Answer

A)   Narrowing current account deficit
B)   Excessive expansion of domestic borrowing
C)   Low relative price inflation rates
D)   Asset price deflationE) All of the above
F) B) and D)

Question 3

Which of the following changes were made to the International Monetary Fund's Articles of Agreement in the Jamaica agreement?

Accepted Answer

A)   IMF members were permitted to use the U.S. dollar as the convertible currency.
B)   Gold was declared as a formal reserve asset for IMF members.
C)   IMF members were permitted to sell their gold reserves at the market price.
D)   IMF members were restricted from entering the foreign exchange market.E) All of the above
F) A) and B)

Question 4

International Development Association loans:

Accepted Answer

A)   receive direct funding from the World Bank.
B)   must be countersigned by a partnering, wealthy country such as the United States, Japan, or Germany.
C)   are funded through subscriptions from wealthy members.
D)   receive direct funding from the International Monetary Fund.E) A) and B)
F) C) and D)

Question 5

Do you think businesses can influence government policies? Explain your answer.

Accepted Answer

As major players in the international tr...

Question 6

Countries that require substantial loans from the International Monetary Fund to survive will _____ due to IMF-mandated economic policies.

Accepted Answer

A)   benefit from a sharp expansion of demand in the long term
B)   endure a sharp contraction of demand in the long term
C)   benefit from a sharp expansion of demand in the short term
D)   endure a sharp contraction of demand in the short termE) C) and D)
F) All of the above

Question 7

The amount of a currency needed to purchase one ounce of gold was referred to as the _____.

Accepted Answer

A)   golden rule
B)   gold standard
C)   pegged gold value
D)   gold par valueE) A) and B)
F) B) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A pegged exchange rate means that the value of a currency is:

Accepted Answer

A)   fixed against other currencies based on an agreement.
B)   not determined by free market forces.
C)   fixed relative to a reference currency.
D)   independent of the valuations of other currencies.E) None of the above
F) C) and D)

Question 10

Increasingly the _____ has been acting as macroeconomic police of the world economy, insisting that countries seeking significant borrowings adopt certain macroeconomic policies.

Accepted Answer

A)   Economic and Social Council (ECOSO
C)  
B)   International Monetary Fund (IMF) 
C)   United Nations (UN) 
D)   World BankE) A) and B)
F) None of the above

Question 11

A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following arguments is against the use of fixed exchange rates?

Accepted Answer

A)   Monetary discipline is the most important determinant of a strong economy.
B)   Each country has the freedom to choose its own inflation rate.
C)   Market speculation can cause fluctuations in exchange rates.
D)   Governments are likely to expand the monetary supply far too rapidly due to political pressures.E) B) and C)
F) All of the above

Question 13

World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Accepted Answer

A) True 
 B)False

Question 14

The current system of foreign exchange is a mixed system of government intervention and speculative activity.

Accepted Answer

A) True 
 B)False

Question 15

It is difficult if not impossible to get adequate insurance coverage for exchange rates that:

Accepted Answer

A)   will occur in the next few weeks.
B)   might occur in the next few months.
C)   might occur several years in the future.
D)   are likely to occur in the coming days.E) All of the above
F) B) and D)

Question 16

Most of the loans issued by the IMF:

Accepted Answer

A)   are conditional loans.
B)   are unconditional loans.
C)   include a macroeconomic policy that calls for lower interest rates.
D)   include a macroeconomic policy that calls for increases in public spending to improve infrastructure in a country.E) C) and D)
F) B) and D)

Question 17

What is international monetary system? What are the major trading currencies?

Accepted Answer

The international monetary system refers...

Question 18

Explain the events that led to the failure of the Bretton Woods system.

Accepted Answer

The Bretton Woods system started to fall...

Question 19

Moral hazard arises when people behave recklessly because:

Accepted Answer

A)   of the restrictions that exist in a country's monetary policy.
B)   of the restrictions that IMF has imposed on them.
C)   they know they will be saved if things go wrong.
D)   they face financial difficulties arising out of external factors.E) A) and B)
F) A) and C)

Question 20

The International Monetary Fund made pegging the Mexican peso to the dollar, a condition for lending money to the Mexican government in the 1980s.

Accepted Answer

A) True 
 B)False

Exam 11: The International Monetary System

The current system of foreign exchange is a mixed system of government intervention and speculative activity.

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

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Moral hazard arises when people behave recklessly because:

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Which of the following changes were made to the International Monetary Fund's Articles of Agreement in the Jamaica agreement?

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Countries that require substantial loans from the International Monetary Fund to survive will _____ due to IMF-mandated economic policies.

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Do you think businesses can influence government policies? Explain your answer.

Correct AnswerverifiedAs major players in the international tr...View AnswerShow Answer

What is international monetary system? What are the major trading currencies?

Correct AnswerverifiedThe international monetary system refers...View AnswerShow Answer

Most of the loans issued by the IMF:

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It is difficult if not impossible to get adequate insurance coverage for exchange rates that:

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The amount of a currency needed to purchase one ounce of gold was referred to as the _____.

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A pegged exchange rate means that the value of a currency is:

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Increasingly the _____ has been acting as macroeconomic police of the world economy, insisting that countries seeking significant borrowings adopt certain macroeconomic policies.

Correct AnswerverifiedShow Answer

The world's four major trading currencies, the Japanese yen, the U.S. dollar, the British pound, and the European Union's euro are all free to float against each other. What is this an example of?

Correct AnswerverifiedShow 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.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a foreign debt crisis?

Correct AnswerverifiedShow Answer

The International Monetary Fund made pegging the Mexican peso to the dollar, a condition for lending money to the Mexican government in the 1980s.

Correct AnswerverifiedShow Answer

Which of the following arguments is against the use of fixed exchange rates?

Correct AnswerverifiedShow Answer

Explain the events that led to the failure of the Bretton Woods system.

Correct AnswerverifiedThe Bretton Woods system started to fall...View AnswerShow Answer

International Development Association loans:

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World Bank offers low-interest loans to risky customers whose credit rating is often poor.

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As major players in the international tr...
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The international monetary system refers...
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The Bretton Woods system started to fall...
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