Exam 18: The International Financial System

A capital ________ can promote financial instability in an emerging-market country because it is what forces a country to ________ its currency.

Under the Bretton Woods system,the IMF could encourage deficit countries to pursue contractionary monetary policies that would ________ their currency or eliminate their balance of payment ________.

The German central bank gained international reserves in the early 1970s because it sold ________ to prevent mark ________.

The fixed exchange rate regime established at a meeting in New Hampshire in 1944 has been known as the

Everything else held constant,if a central bank makes an unsterilized ________ of foreign assets,then the domestic money supply will ________ and the domestic currency will appreciate.

Between May and July 1997,concerns about the large current account deficit in Thailand and the weakness in the Thai financial system caused speculators to suspect that Thailand might be forced to

Under the Exchange Rate Mechanism of the European Monetary System,when the British pound depreciated below its lower limit against the German mark,the Bank of England was required to buy ________ and sell ________,thereby ________ international reserves.

If a central bank does not want to see its currency ________ in value,it may pursue contractionary monetary policy to raise the domestic interest rate,thereby ________ its currency.

Assume that a fixed exchange rate is overvalued.Describe the situation of a speculative crisis against this currency.What can the central bank do to defend the currency? Why might the alternative of devaluation be preferable?

An international lender of last resort creates a serious moral hazard problem because ________ and other ________ of banking institutions expect that they will be protected if a crisis occurs.

Countries with surpluses in their balance of payments frequently do not want to see their currencies ________ because it makes their goods ________ expensive abroad.

When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency,then the country is said to have

Which of the following does not appear in the current account part of the balance of payments?

Capital ________ are American purchases of foreign assets,and capital ________ are foreign purchases of American assets.

When gold production was low in the 1870s and 1880s,the money supply grew ________ causing ________.

The revenue a government gains from issuing money is

The monetary policy strategy that does not allow the policy to focus on domestic considerations is

A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal increase in its international reserves and the monetary base,everything else held constant.

An international lender of last resort creates a serious ________ problem because depositors and other creditors of banking institutions expect that they will be protected if a crisis occurs.

The monetary policy strategy that results in the loss of an independent monetary policy is