Exam 19: The International Financial System

To maintain fixed exchange rates when countries had balance of payments deficits and were losing international reserves, the ________ would loan ________ countries international reserves contributed by other members.

If the current account balance shows a surplus, and the capital account also shows a surplus, then the official reserve transactions balance ________.

Because it provides some indication of what is happening to Canadian claims on foreign wealth and the demand for imports and exports, the ________ is closely followed by economists wanting information on the future movement of exchange rates.

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.

Under a fixed exchange rate regime, if the domestic currency is initially overvalued, that is, below par, the central bank must intervene to purchase the ________ currency by selling ________ assets.

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 ________.

The monetary policy strategy that directly ties down the price of internationally traded goods is ________.

A balance of payments deficit is associated with a ________ of international reserves, while a balance of payments surplus is associated with a ________.

Exchange-rate targeting is not an option for the U.S. because ________.

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

How would the Bank of Canada operate in a fixed exchange rate regime when the dollar is overvalued and undervalued? What are the effects on international reserves?

Under the Bretton Woods system, a country running a balance of payments deficit ________ international reserves, and had to implement ________ monetary policy to strengthen its currency.

As a result of its power to dictate loan terms to borrowing countries (under the Bretton Woods system), the IMF could encourage ________ countries to pursue ________ monetary policies that would strengthen their currency or eliminate their balance of payments deficits.

In September 1992, the Bundesbank attempted to keep the mark from appreciating relative to the British pound, but it failed because participants in the foreign exchange market came to expect the ________.

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

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

The Bretton Woods system was one in which central banks ________.

The Bretton Woods system broke down in the early 1970s for all but one of the following reasons.

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.

Under a fixed exchange rate regime, if the domestic currency is initially ________, that is, ________ par, the central bank must intervene to purchase the domestic currency by selling foreign assets.