Exam 7: The International Monetary System and the Balance of Payments

The gold standard effectively created a floating exchange rate system.

Executives at Octagon Telecom, a global telecommunications firm, are considering investing in a telephone company located in Rwanda. However, many stockholders have expressed concerns about the political risk involved in such an investment. Which of the following would most likely provide political risk insurance to Octagon?

The World Bank can only make a loan if there is a reasonable expectation that it will be repaid.

The initial goal of the World Bank was to help finance the reconstruction of Europe.

Which term refers to linking a currency value to the value of gold?

Which country controls the largest bloc of votes in the IMF?

How can capital inflows occur as credits in the BOP accounting system?

Executives at FDX Industries, an MNE that manufactures automotive parts, want to expand into emerging markets. Which of the following would most likely identify potential emerging markets and indicate reductions in a country's foreign-exchange reserves?

Why was the international monetary system also called the sterling-based gold standard during the gold standard?

Country X paid a quota to the IMF worth the equivalent of $50 million. Now, Country X needs to borrow money from the IMF. What is the maximum amount that Country X may borrow?

London became a major international financial center under the gold standard because of the international trust in the British currency.

The Bretton Woods conference sought to do which of the following?

What did the Bretton Woods conferees agree to do in 1944?

During the gold standard, most firms preferred their payment in gold rather than in currency.

Under Bretton Woods, the euro became the vehicle of choice for settling most international transactions.

From 1821 until the end of World War I in 1918, the most important currency in international commerce was the ________.

Unilateral transfers are recorded in the capital account of the balance of payments.

What determines a country's borrowing power from the IMF?

Once the gold standard was suspended, it was never considered again for use in the international monetary system.

Under the Bretton Woods system, all countries agreed to peg the value of their currency to the U.S. dollar.