Exam 18: The International Financial System

Under a fixed exchange rate regime,if a country's central bank runs out of international reserves,it cannot keep its currency from

Under a fixed exchange rate regime,if a central bank must intervene to purchase the domestic currency by selling foreign assets,then,like an open market sale,this action ________ the monetary base and the money supply,causing the interest rate on domestic assets to ________.

The current international financial system is a managed float exchange rate system because

Under a fixed exchange rate regime,if a country has an undervalued exchange rate,then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

Under the current managed float exchange rate regime,countries with ________ in their balance of payments frequently do not want to see their currencies ________ because it makes their goods more expensive abroad and foreign goods cheaper in their countries.

If a central bank does not want to allow the domestic currency to appreciate,it will ________ international reserves by selling its currency,thereby ________ the monetary base and increasing the risk of higher inflation.

Which of the following appears in the capital account part of the balance of payments?

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

Which of the following is not a disadvantage of controls on capital outflows?

Economists closely follow the current account balance because they believe it can provide information on the future movement of

If the United States has a current account deficit with England of $1 million,and the Bank of England sells $1 million worth of pounds in the foreign exchange market,then England ________ $1 million of international reserves and its monetary base ________ by $1 million.

An advantage of an international lender of last resort is its ability to prevent ________,in which a successful speculative attack on one currency leads to attacks on others; its disadvantage is the problem of ________ if creditors expect to be protected if a crisis occurs.

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

Hong Kong chooses to have ________ and ________ and therefore,cannot have an independent monetary policy at the same time.

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

An advantage to exchange-rate targeting is it helps keep inflation under control by tying the inflation rate for ________ traded goods to what is found in the ________ country.

Under a fixed exchange rate regime,if a country has an overvalued exchange rate,then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

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

In the early 1970s,the U.S.ran large balance of payments ________,causing an ________ dollar and an ________ German mark.

Under exchange-rate targeting,the central bank in the targeting country ________ lose the ability to pursue its own independent monetary policy and any shocks to the anchor country is ________ transmitted to the targeting country.