Exam 18: The International Financial System

Under a gold standard in which one dollar could be turned in to the U.S.Treasury and exchanged for 1/20th of an ounce of gold and one German mark could be exchanged for 1/100th of an ounce of gold,an exchange rate of ________ marks to the dollar would stimulate a flow of gold from the United States to Germany.

Both France and the United Kingdom successfully used exchange-rate targeting to lower inflation in the late 1980s and early 1990s by tying the value of their currencies to the

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

When the central bank allows the purchase or sale of domestic currency to have an effect on the monetary base,it is called

Under the Bretton Woods system,if IMF loans were insufficient to prevent ________ of a currency,then the country was allowed to devalue its currency by setting a new,________ exchange rate.

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

Under the current managed float exchange rate regime,countries with balance of payments ________ frequently do not want to see their currencies ________ because it makes foreign goods more expensive for domestic consumers and can stimulate inflation.

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 depreciate.

Which of the following is true?

Suppose that the Bank of Japan buys U.S.dollar assets with yen-denominated assets.Everything else held constant,this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S.monetary base.

The monetary policy strategy that provides an automatic rule for the conduct of monetary policy is

The Policy Trilemma states that a country or a monetary union can't pursue the following three policies at the same time:

Because the United States was the reserve-currency country under the Bretton Woods system,it could run large balance of payments ________ without ________ significant amounts of international reserves.

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

The difference between merchandise exports and imports is called the ________ balance.

Under the Bretton Woods system,when a country adopted an expansionary monetary policy,thereby causing a balance of payments ________,the country would eventually be forced to implement ________ monetary policy.

The account that shows international transactions involving currently produced goods and services is called the

Of the following,the one that appears in the current account of the balance of payments is

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

A weakness of the Bretton Woods system was that the ________ had no way to force surplus countries to either revalue their exchange rates upwards or pursue more expansionary policies.