Question 1

Under the Gold standard, a country is said to be in balance of payments equilibrium when the current account balance is

Accepted Answer

A)  financed entirely by international lending without reserve movements. 
B)  financed by international lending and with reserve movements. 
C)  equal to zero. 
D)  financed entirely by international lending and past gold reserves. 
E)  financed entirely by gold reserves. 
A)  financed entirely by international lending without reserve movements. 
B)  financed by international lending and with reserve movements. 
C)  equal to zero. 
D)  financed entirely by international lending and past gold reserves. 
E)  financed entirely by gold reserves.

Question 2

The reason that the claim that floating exchange rates result in greater economic autonomy for individual countries may not be entirely accurate is that

Accepted Answer

A)  empirical research finds no supporting data. 
B)  policy makers are influenced by the effect of domestic policies on the exchange rate. 
C)  there is no generally satisfactory method for measuring economic autonomy. 
D)  it is based on the assumption of a gold standard. 
E)  countries that run large trade deficits must increase exports to balance trade. 
A)  empirical research finds no supporting data. 
B)  policy makers are influenced by the effect of domestic policies on the exchange rate. 
C)  there is no generally satisfactory method for measuring economic autonomy. 
D)  it is based on the assumption of a gold standard. 
E)  countries that run large trade deficits must increase exports to balance trade.

Question 3

Refer to the payoff matrix below, which ________ a prisoner's dilemma. If both countries go it alone, Home will choose Policy ________ and Foreign will choose Policy ________.

Accepted Answer

A)  is; 1; A 
B)  is; 2; B 
C)  is; 1; B 
D)  is not; 2; B 
E)  is not; 1; A 
A)  is; 1; A 
B)  is; 2; B 
C)  is; 1; B 
D)  is not; 2; B 
E)  is not; 1; A

Question 4

Under fixed exchange rates, domestic asset transactions by the central bank

Accepted Answer

A)  can be used to alter the level of foreign reserves but not to affect the state of employment and output. 
B)  cannot be used to alter the level of foreign reserves but only to affect the state of employment and output. 
C)  can be used to alter the level of foreign reserves and to affect the state of employment and output. 
D)  can be used to alter the domestic money supply and the level of foreign reserves. 
E)  can raise output to full-employment level. 
A)  can be used to alter the level of foreign reserves but not to affect the state of employment and output. 
B)  cannot be used to alter the level of foreign reserves but only to affect the state of employment and output. 
C)  can be used to alter the level of foreign reserves and to affect the state of employment and output. 
D)  can be used to alter the domestic money supply and the level of foreign reserves. 
E)  can raise output to full-employment level.

Question 5

Advocates of flexible exchange rates claim that under flexible exchange rates

Accepted Answer

A)  no country would be forced to import only inflation from abroad. 
B)  no country would be forced to import only deflation from abroad. 
C)  no country would be forced to import inflation and deflation from abroad. 
D)  flexible exchange rates are not able to halt importing inflation from abroad. 
E)  flexible exchange rates are not able to halt importing deflation from abroad. 
A)  no country would be forced to import only inflation from abroad. 
B)  no country would be forced to import only deflation from abroad. 
C)  no country would be forced to import inflation and deflation from abroad. 
D)  flexible exchange rates are not able to halt importing inflation from abroad. 
E)  flexible exchange rates are not able to halt importing deflation from abroad.

Question 6

Refer to the graph below. The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic ________ and ________.

Accepted Answer

A)  overemployment; trade surplus 
B)  unemployment; trade surplus 
C)  overemployment; trade deficit 
D)  unemployment; trade deficit 
E)  inflation; unemployment 
A)  overemployment; trade surplus 
B)  unemployment; trade surplus 
C)  overemployment; trade deficit 
D)  unemployment; trade deficit 
E)  inflation; unemployment

Question 7

Countries with the

Accepted Answer

A)  biggest deflations and output contractions are countries which were never on the gold standard until 1936. 
B)  biggest inflations and output contractions are countries which were on the gold standard until 1936. 
C)  lowest deflations and output contractions are countries which were on the gold standard until 1936. 
D)  biggest deflations and output increases are countries which were on the gold standard until 1936. 
E)  biggest deflations and output contractions are countries which stayed on the gold standard until 1936. 
A)  biggest deflations and output contractions are countries which were never on the gold standard until 1936. 
B)  biggest inflations and output contractions are countries which were on the gold standard until 1936. 
C)  lowest deflations and output contractions are countries which were on the gold standard until 1936. 
D)  biggest deflations and output increases are countries which were on the gold standard until 1936. 
E)  biggest deflations and output contractions are countries which stayed on the gold standard until 1936.

Question 8

The "rules of the game" under the gold standard can best be described as which of the following:

Accepted Answer

A)  selling domestic assets in a deficit and buying assets in a surplus. 
B)  slowing down the automatic adjustments processes inherent in the gold standard. 
C)  selling domestic assets in order to accumulate gold. 
D)  selling foreign assets in a deficit and buying foreign assets in a surplus. 
E)  selling domestic assets in a surplus. 
A)  selling domestic assets in a deficit and buying assets in a surplus. 
B)  slowing down the automatic adjustments processes inherent in the gold standard. 
C)  selling domestic assets in order to accumulate gold. 
D)  selling foreign assets in a deficit and buying foreign assets in a surplus. 
E)  selling domestic assets in a surplus.

Question 9

Inflation can occur under conditions of full employment

Accepted Answer

A)  only if the central bank continues to inject money into the economy and the agents' expectations of inflation are supported by the bank's activities. 
B)  only if the central bank continues to inject money into the economy. 
C)  only if the central bank continues to withdraw money from the economy. 
D)  only if the central bank continues to inject money into the economy and all agents expect that inflation will not occur. 
E)  only if the central bank fails to inject money into the economy. 
A)  only if the central bank continues to inject money into the economy and the agents' expectations of inflation are supported by the bank's activities. 
B)  only if the central bank continues to inject money into the economy. 
C)  only if the central bank continues to withdraw money from the economy. 
D)  only if the central bank continues to inject money into the economy and all agents expect that inflation will not occur. 
E)  only if the central bank fails to inject money into the economy.

Question 10

The confidence problem of the Bretton Woods systems articulated by Robert Triffin refers to

Accepted Answer

A)  the unwillingness of central banks to accumulate currency for fear of not being able to convert it to gold in case a run on the banks occurs. 
B)  consumer fear of stock market instability. 
C)  producer fear of rising wages. 
D)  the lack of convertibility of gold into silver. 
E)  low consumer spending because of balance of payment crises. 
A)  the unwillingness of central banks to accumulate currency for fear of not being able to convert it to gold in case a run on the banks occurs. 
B)  consumer fear of stock market instability. 
C)  producer fear of rising wages. 
D)  the lack of convertibility of gold into silver. 
E)  low consumer spending because of balance of payment crises.

Question 11

What are the outcomes of the following games, assuming the max-min criteria is used?

Accepted Answer

There are two equilibria in th

Question 12

Under a flexible exchange rate regime, an increase in real money demand

Accepted Answer

A)  moves the AA curve to the right. 
B)  moves the AA curve to the left. 
C)  leaves the AA curve unchanged. 
D)  moves the DD curve to the right. 
E)  moves the DD curve to the left. 
A)  moves the AA curve to the right. 
B)  moves the AA curve to the left. 
C)  leaves the AA curve unchanged. 
D)  moves the DD curve to the right. 
E)  moves the DD curve to the left.

Question 13

An attempt by a central bank to alter the money supply by buying or selling domestic assets

Accepted Answer

A)  will leave both domestic money supply and foreign reserves unchanged. 
B)  will cause an offsetting change in aggregate demand. 
C)  will lead to a rise in domestic employment and output. 
D)  will lead to a decrease in domestic employment and output. 
E)  will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged. 
A)  will leave both domestic money supply and foreign reserves unchanged. 
B)  will cause an offsetting change in aggregate demand. 
C)  will lead to a rise in domestic employment and output. 
D)  will lead to a decrease in domestic employment and output. 
E)  will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged.

Question 14

"The line distinguishing external from internal goals can be fuzzy." Discuss.

Accepted Answer

This statement is true. For ex

Question 15

Due to macroeconomics interdependence between large countries, the effect of a permanent fiscal expansion by Home is as follows: Home output

Accepted Answer

A)  falls, Home's currency appreciates, Foreign output rises. 
B)  rises, Home's currency appreciates, Foreign output rises. 
C)  rises, Home's currency depreciates, Foreign output rises. 
D)  rises, Home's currency appreciates, Foreign output decreases. 
E)  falls, Homes currency depreciates, Foreign output rises. 
A)  falls, Home's currency appreciates, Foreign output rises. 
B)  rises, Home's currency appreciates, Foreign output rises. 
C)  rises, Home's currency depreciates, Foreign output rises. 
D)  rises, Home's currency appreciates, Foreign output decreases. 
E)  falls, Homes currency depreciates, Foreign output rises.

Question 16

Advocates of flexible exchange rates claim that under flexible exchange rates, a currency

Accepted Answer

A)  appreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
B)  depreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products. 
C)  depreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
D)  depreciation caused by increasing the money supply would reduce unemployment by increasing the relative price of domestic products. 
E)  depreciation cause by decreasing the money supply would not effect unemployment, but would increase the relative price of domestic products. 
A)  appreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
B)  depreciation caused by increasing the money supply would increase unemployment by lowering the relative price of domestic products. 
C)  depreciation caused by increasing the money supply would reduce unemployment by lowering the relative price of domestic products. 
D)  depreciation caused by increasing the money supply would reduce unemployment by increasing the relative price of domestic products. 
E)  depreciation cause by decreasing the money supply would not effect unemployment, but would increase the relative price of domestic products.

Question 17

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

Accepted Answer

A)  freedom of international capital movements 
B)  exchange rate instability 
C)  tariffs and subsidies 
D)  restrictions on the migration of labor 
E)  global inflation 
A)  freedom of international capital movements 
B)  exchange rate instability 
C)  tariffs and subsidies 
D)  restrictions on the migration of labor 
E)  global inflation

Question 18

The IMF agreement forced the U.S. to exchange gold for dollars at what price?

Accepted Answer

A)  $25/ ounce 
B)  $35/ ounce 
C)  $45/ ounce 
D)  $55/ ounce 
E)  $20/ ounce 
A)  $25/ ounce 
B)  $35/ ounce 
C)  $45/ ounce 
D)  $55/ ounce 
E)  $20/ ounce

Question 19

Refer to the graph below, which shows the effect of ________ on the home economy.

Accepted Answer

A)  foreign inflation 
B)  domestic inflation 
C)  foreign deflation 
D)  domestic recession 
E)  foreign recession 
A)  foreign inflation 
B)  domestic inflation 
C)  foreign deflation 
D)  domestic recession 
E)  foreign recession

Question 20

Maintaining a fixed exchange rate over the long run is today

Accepted Answer

A)  virtually impossible. 
B)  more vulnerable to speculative attacks than in the past. 
C)  preferable. 
D)  possible only in special cases such as maintaining strict capital controls. 
E)  aided by technology which allows instant movement of money between financial markets in different countries. 
A)  virtually impossible. 
B)  more vulnerable to speculative attacks than in the past. 
C)  preferable. 
D)  possible only in special cases such as maintaining strict capital controls. 
E)  aided by technology which allows instant movement of money between financial markets in different countries.

Exam 19: International Monetary Systems: an Historical Overview

Under the Gold standard, a country is said to be in balance of payments equilibrium when the current account balance is

The reason that the claim that floating exchange rates result in greater economic autonomy for individual countries may not be entirely accurate is that

Refer to the payoff matrix below, which ________ a prisoner's dilemma. If both countries go it alone, Home will choose Policy ________ and Foreign will choose Policy ________.

Under fixed exchange rates, domestic asset transactions by the central bank

Advocates of flexible exchange rates claim that under flexible exchange rates

Refer to the graph below. The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic ________ and ________.

Countries with the

The "rules of the game" under the gold standard can best be described as which of the following:

Inflation can occur under conditions of full employment

The confidence problem of the Bretton Woods systems articulated by Robert Triffin refers to

What are the outcomes of the following games, assuming the max-min criteria is used?

Under a flexible exchange rate regime, an increase in real money demand

An attempt by a central bank to alter the money supply by buying or selling domestic assets

"The line distinguishing external from internal goals can be fuzzy." Discuss.

Due to macroeconomics interdependence between large countries, the effect of a permanent fiscal expansion by Home is as follows: Home output

Advocates of flexible exchange rates claim that under flexible exchange rates, a currency

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

The IMF agreement forced the U.S. to exchange gold for dollars at what price?

Refer to the graph below, which shows the effect of ________ on the home economy.

Maintaining a fixed exchange rate over the long run is today

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

Filters

Refer to the payoff matrix below, which a prisoner's dilemma. If both countries go it alone, Home will choose Policy and Foreign will choose Policy .

Refer to the graph below. The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic and .