Question 1

The dollar of the United States became the postwar world's key currency because of all EXCEPT

Accepted Answer

A)  the early convertibility of the U.S. dollar in 1945. 
B)  the special position of the dollar under the Bretton Woods system. 
C)  the strength of the American economy relative to the devastated economies of Europe and Japan. 
D)  central banks naturally found it advantageous to hold their international reserves in the form of interest-bearing dollar assets. 
E)  the ease of transporting U.S. dollars compared with other currencies. 
A)  the early convertibility of the U.S. dollar in 1945. 
B)  the special position of the dollar under the Bretton Woods system. 
C)  the strength of the American economy relative to the devastated economies of Europe and Japan. 
D)  central banks naturally found it advantageous to hold their international reserves in the form of interest-bearing dollar assets. 
E)  the ease of transporting U.S. dollars compared with other currencies.

Question 2

Countries where investment is

Accepted Answer

A)  relatively unproductive should have current account deficits. 
B)  relatively productive should have current account surpluses. 
C)  relatively productive should have current account deficits. 
D)  relatively productive should have balanced current accounts. 
E)  relatively unproductive should have balanced current accounts. 
A)  relatively unproductive should have current account deficits. 
B)  relatively productive should have current account surpluses. 
C)  relatively productive should have current account deficits. 
D)  relatively productive should have balanced current accounts. 
E)  relatively unproductive should have balanced current accounts.

Question 3

Using an equation, explain why governments prefer to avoid excessive current account surpluses?

Accepted Answer

This follows from the national

Question 4

A sudden decrease in the U.S. price level

Accepted Answer

A)  makes creditors in dollars better off. 
B)  makes creditors in dollars worse off. 
C)  does not affect creditors in dollars. 
D)  makes creditors in DM better off. 
E)  makes those with dollar debts better off. 
A)  makes creditors in dollars better off. 
B)  makes creditors in dollars worse off. 
C)  does not affect creditors in dollars. 
D)  makes creditors in DM better off. 
E)  makes those with dollar debts better off.

Question 5

A current account surplus

Accepted Answer

A)  poses a problem if domestic savings are being invested more profitably abroad than they would be at home. 
B)  may pose no problem if domestic savings are being invested more profitably abroad than they would be at home. 
C)  may pose no problem if domestic savings are being invested less profitably abroad than they would be at home. 
D)  There is no relation between current account surplus and between savings and investment. 
E)  poses a problem if domestic savings are being invested less profitably abroad than they would be at home. 
A)  poses a problem if domestic savings are being invested more profitably abroad than they would be at home. 
B)  may pose no problem if domestic savings are being invested more profitably abroad than they would be at home. 
C)  may pose no problem if domestic savings are being invested less profitably abroad than they would be at home. 
D)  There is no relation between current account surplus and between savings and investment. 
E)  poses a problem if domestic savings are being invested less profitably abroad than they would be at home.

Question 6

Under fixed exchange rates

Accepted Answer

A)  monetary policy is not an effective policy. 
B)  fiscal policy is not an effective policy. 
C)  monetary policy and fiscal policy are not effective. 
D)  both monetary and fiscal policies are effective. 
E)  monetary policy has an unpredictable effect on the domestic money supply. 
A)  monetary policy is not an effective policy. 
B)  fiscal policy is not an effective policy. 
C)  monetary policy and fiscal policy are not effective. 
D)  both monetary and fiscal policies are effective. 
E)  monetary policy has an unpredictable effect on the domestic money supply.

Question 7

Advocates of flexible exchange rates claim that under flexible exchange rates, the central bank of

Accepted Answer

A)  an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
B)  a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
C)  an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
D)  an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort. 
E)  an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort. 
A)  an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
B)  a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
C)  an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. 
D)  an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort. 
E)  an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort.

Question 8

Advocates of flexible exchange rates claim that under flexible exchange rates

Accepted Answer

A)  enhanced control over fiscal policy would allow countries to dismantle their distorting barriers to international payments. 
B)  reduced control over monetary policy would allow countries to dismantle their distorting barriers to international payments. 
C)  enhanced control over monetary policy would allow countries to increase their distorting barriers to international payments. 
D)  enhanced control over monetary policy would allow countries to dismantle their distorting barriers to international payments. 
E)  enhanced control over monetary policy would destabilize exchange rates. 
A)  enhanced control over fiscal policy would allow countries to dismantle their distorting barriers to international payments. 
B)  reduced control over monetary policy would allow countries to dismantle their distorting barriers to international payments. 
C)  enhanced control over monetary policy would allow countries to increase their distorting barriers to international payments. 
D)  enhanced control over monetary policy would allow countries to dismantle their distorting barriers to international payments. 
E)  enhanced control over monetary policy would destabilize exchange rates.

Question 9

The costs of inflation have been most apparent in the post-war period in countries like

Accepted Answer

A)  Brazil. 
B)  Belgium. 
C)  the United States. 
D)  Canada. 
E)  Japan. 
A)  Brazil. 
B)  Belgium. 
C)  the United States. 
D)  Canada. 
E)  Japan.

Question 10

How did the international monetary system influence macroeconomic policy-making and performance during the gold standard era (1870-1914)?

Accepted Answer

London was the center of the internation

Question 11

The gold standard period was

Accepted Answer

A)  up until the first world war. 
B)  between the first and second world wars. 
C)  following the second world war until 1970. 
D)  between 1954 and 1970. 
E)  between 1814 and 1865. 
A)  up until the first world war. 
B)  between the first and second world wars. 
C)  following the second world war until 1970. 
D)  between 1954 and 1970. 
E)  between 1814 and 1865.

Question 12

Which of the following is the MOST accurate?

Accepted Answer

A)  U.S. macroeconomic policies in the late 1960s helped cause the breakdown of the Bretton Woods system by early 1973. 
B)  U.S. macroeconomic policies in the late 1970s helped cause the breakdown of the Bretton Woods system by early 1983. 
C)  U.S. macroeconomic policies in the late 1980s helped cause the breakdown of the Bretton Woods system by early 1993. 
D)  U.S. macroeconomic policies in the late 1950s helped cause the breakdown of the Bretton Woods system by early 1963. 
E)  U.S. macroeconomic policies in the late 1960s delayed the breakdown of the Bretton Woods system to early 1973. 
A)  U.S. macroeconomic policies in the late 1960s helped cause the breakdown of the Bretton Woods system by early 1973. 
B)  U.S. macroeconomic policies in the late 1970s helped cause the breakdown of the Bretton Woods system by early 1983. 
C)  U.S. macroeconomic policies in the late 1980s helped cause the breakdown of the Bretton Woods system by early 1993. 
D)  U.S. macroeconomic policies in the late 1950s helped cause the breakdown of the Bretton Woods system by early 1963. 
E)  U.S. macroeconomic policies in the late 1960s delayed the breakdown of the Bretton Woods system to early 1973.

Question 13

If most of the shocks that buffet the economy come from the output market shocks, then

Accepted Answer

A)  fixed exchange rates are better than flexible exchange rates. 
B)  flexible exchange rates are better than fixed exchange rates. 
C)  which system is chosen is not important. 
D)  fixed exchange rates are better than flexible exchange rates only in the short run. 
E)  flexible exchange rates are better than fixed exchange rates only in the short-run. 
A)  fixed exchange rates are better than flexible exchange rates. 
B)  flexible exchange rates are better than fixed exchange rates. 
C)  which system is chosen is not important. 
D)  fixed exchange rates are better than flexible exchange rates only in the short run. 
E)  flexible exchange rates are better than fixed exchange rates only in the short-run.

Question 14

-Refer to the above figure. Use the DD-AA model to examine and compare the response of an economy under fixed and floating exchange rate to a temporary fall in foreign demand for its exports.

Accepted Answer

The DD curve shifts to the left. When th

Question 15

The Great Depression that started in 1929 was

Accepted Answer

A)  confined only to the United States. 
B)  confined only to the United States and Britain. 
C)  confined only to the United States and Europe. 
D)  a global phenomenon. 
E)  confined only to the Americas. 
A)  confined only to the United States. 
B)  confined only to the United States and Britain. 
C)  confined only to the United States and Europe. 
D)  a global phenomenon. 
E)  confined only to the Americas.

Question 16

The case of New Zealand, described in the text, draws what technical conclusion regarding the country's international debt position?

Accepted Answer

Fundamentally, the question is whether o

Question 17

What has been learned since 1973 with regards to the experience with floating exchange rate regime?

Accepted Answer

(1) Monetary policy autonomy: Yes, howev

Question 18

Use the DD-AA model to compare the domestic economic response under flexible and fixed exchange rate regimes to a temporary rise in export demand from foreign countries.

Accepted Answer

Under floating rate: The DD curve shifts

Question 19

Under the flexible exchange rate, lowering the price of a foreign currency will

Accepted Answer

A)  allow the expansion of monetary policy without causing inflation. 
B)  decrease the foreign country's output. 
C)  prevent a foreign price increase from causing deflation at home. 
D)  cause a home price increase to be exported to the foreign markets. 
E)  cause a "beggar-thy-neighbor" effect. 
A)  allow the expansion of monetary policy without causing inflation. 
B)  decrease the foreign country's output. 
C)  prevent a foreign price increase from causing deflation at home. 
D)  cause a home price increase to be exported to the foreign markets. 
E)  cause a "beggar-thy-neighbor" effect.

Question 20

Once the United States Civil War broke out, the United States moved to a

Accepted Answer

A)  gold standard. 
B)  silver standard. 
C)  bimetallic monetary standard consisting of silver and gold. 
D)  bimetallic monetary standard consisting of copper and gold. 
E)  paper currency, called the "greenback." 
A)  gold standard. 
B)  silver standard. 
C)  bimetallic monetary standard consisting of silver and gold. 
D)  bimetallic monetary standard consisting of copper and gold. 
E)  paper currency, called the "greenback."

Exam 19: International Monetary Systems: an Historical Overview

The dollar of the United States became the postwar world's key currency because of all EXCEPT

Countries where investment is

Using an equation, explain why governments prefer to avoid excessive current account surpluses?

A sudden decrease in the U.S. price level

A current account surplus

Under fixed exchange rates

Advocates of flexible exchange rates claim that under flexible exchange rates, the central bank of

Advocates of flexible exchange rates claim that under flexible exchange rates

The costs of inflation have been most apparent in the post-war period in countries like

How did the international monetary system influence macroeconomic policy-making and performance during the gold standard era (1870-1914)?

The gold standard period was

Which of the following is the MOST accurate?

If most of the shocks that buffet the economy come from the output market shocks, then

-Refer to the above figure. Use the DD-AA model to examine and compare the response of an economy under fixed and floating exchange rate to a temporary fall in foreign demand for its exports.

The Great Depression that started in 1929 was

The case of New Zealand, described in the text, draws what technical conclusion regarding the country's international debt position?

What has been learned since 1973 with regards to the experience with floating exchange rate regime?

Use the DD-AA model to compare the domestic economic response under flexible and fixed exchange rate regimes to a temporary rise in export demand from foreign countries.

Under the flexible exchange rate, lowering the price of a foreign currency will

Once the United States Civil War broke out, the United States moved to a

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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