Exam 30: The International Financial System

Under pressure from Japan, the United States, and Europe, China announced in July 2005 that it would switch from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies. The result of this change was

Under the gold standard, to increase the money supply in the country, the government must

An increase in the value of the U.S. dollar relative to the Japanese yen would be ________ for Japanese owners of U.S. houses who wish to sell those houses, and ________ for Japanese manufacturers operating factories in the United States that export their products back to Japan.

If the implied exchange rate between Big Mac prices in the United States and Poland is 2.13 zlotys per dollar, but the actual exchange rate between the United States and Poland is 3.16 zlotys per dollar, which of the following would you expect to see?

If speculators believe a currency is soon going to be revalued, they will increase their demand for that currency.

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely, they began to ________ in Thailand and exchange ________. This change in investment by foreigners is termed capital flight.

China began pegging its currency, the yuan, to the dollar in 1994. Because the yuan has been ________ at the pegged exchange rate, the Chinese government ________ its reserves of dollars as the government purchased more ________ to maintain the pegged exchange rate.

Figure 30-1 -Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

Figure 30-10 -Refer to Figure 30-10. Under the Bretton Woods System of exchange rates, if the par exchange rate was $2 per pound in the figure above, and equilibrium persisted at $3, then a revaluation of the currency would have

If inflation in Russia is higher than it is in the United States

The currency adopted by most countries in ________ is referred to as the euro.

Foreign currency prices of the U.S. dollar are currently determined by a managed float exchange rate system.

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms, which of the following would you expect to see? (India's currency is the rupee.)

All else being equal, if the rate of growth in productivity in countries that use the euro is greater than the rate of growth in productivity in the United States, the euro

Which of the following is a drawback to having a common currency across countries, as in the European Union?

Figure 30-12 -Refer to Figure 30-12. The graph above depicts supply and demand for U.S. dollars during a trading day, where the quantity is millions of dollars. In order to support a fixed exchange rate of 0.30 pounds per dollar, the U.S. central bank must

Limits on the flow of foreign exchange and financial investment across countries are called

One reason purchasing power parity does not exactly hold is that many goods are not traded internationally.

If the rate of inflation in the United States exceeds the rate of inflation in Great Britain we would expect the U.S. dollar to depreciate in value against the British pound.

If the purchasing power of the dollar is less than the purchasing power of the British pound, purchasing power parity predicts that the exchange rate will