Question 1

Which of the following is $\underline {  \text { not }  }$ a condition of the international gold standard? That a nation must:

Accepted Answer

A)  Convert gold into paper currency, and vice versa, at a stipulated rate 
B)  Permit gold to be freely imported and exported 
C)  Tolerate wide fluctuations in its exchange rate 
D)  Define its monetary unit in terms of a stipulated amount of gold 
A)  Convert gold into paper currency, and vice versa, at a stipulated rate 
B)  Permit gold to be freely imported and exported 
C)  Tolerate wide fluctuations in its exchange rate 
D)  Define its monetary unit in terms of a stipulated amount of gold C

Question 2

The U.S. dollar has been considered a reserve (key) currency because trading nations have been willing to hold it as an international reserve asset.

Accepted Answer

A) True 
 B)False  True

Question 3

Gold is currently the most widely used asset in the international monetary system.

Accepted Answer

A) True 
 B)False  False

Question 4

When granting loans to financially troubled nations, the International Monetary Fund requires some degree of conditionality, meaning that the borrowing nation must agree to implement economic policies as mandated by the IMF.

Accepted Answer

A) True 
 B)False

Question 5

"Owned" international reserves consist of:

Accepted Answer

A)  Special drawing rights 
B)  Oil facility 
C)  IMF drawings 
D)  Reciprocal currency arrangements 
A)  Special drawing rights 
B)  Oil facility 
C)  IMF drawings 
D)  Reciprocal currency arrangements

Question 6

Because the value of the SDR is tied directly to the value of the U.S. dollar, a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.

Accepted Answer

A) True 
 B)False

Question 7

Why do countries hold international reserves?

Accepted Answer

The purpose of international r

Question 8

Which of the following assets was (were) created in 1970 to provide additional international liquidity, in the belief that increasing world trade requires more liquidity for larger expected payments imbalances?

Accepted Answer

A)  Eurodollar market 
B)  Special drawing rights 
C)  Reciprocal currency arrangements 
D)  General arrangements to borrow 
A)  Eurodollar market 
B)  Special drawing rights 
C)  Reciprocal currency arrangements 
D)  General arrangements to borrow

Question 9

Describe the eurocurrency market.

Accepted Answer

Eurocurrencies are deposits, denominated

Question 10

Which of the following is$\underline {  \text { not }  }$ considered an "owned" reserve?

Accepted Answer

A)  National currencies 
B)  Gold 
C)  Special drawing rights 
D)  Oil facility 
A)  National currencies 
B)  Gold 
C)  Special drawing rights 
D)  Oil facility

Question 11

Eurodollars are:

Accepted Answer

A)  Dollar-denominated deposits in overseas banks 
B)  European currencies used to finance transactions in the United States 
C)  Dollars that U.S. residents spend in Europe 
D)  European currencies used to finance imports from the United States 
A)  Dollar-denominated deposits in overseas banks 
B)  European currencies used to finance transactions in the United States 
C)  Dollars that U.S. residents spend in Europe 
D)  European currencies used to finance imports from the United States

Question 12

The U.S. gold $\underline {   \text { outflow } }$ that began in the late 1940s and continued through the 1960s was due in part to:

Accepted Answer

A)  Crawling pegged exchange rates 
B)  Freely floating exchange rates 
C)  An undervalued dollar 
D)  An overvalued dollar 
A)  Crawling pegged exchange rates 
B)  Freely floating exchange rates 
C)  An undervalued dollar 
D)  An overvalued dollar

Question 13

To the extent that adjustments in prices, interest rates, and income levels promote balance-of-payments equilibrium, the demand for international reserves decreases.

Accepted Answer

A) True 
 B)False

Question 14

The Federal Reserve's swap network represents:

Accepted Answer

A)  Efforts to stabilize only the value of the dollar 
B)  Efforts to stabilize only the value of foreign currencies 
C)  Long-term borrowing among countries 
D)  Short-term borrowing among countries 
A)  Efforts to stabilize only the value of the dollar 
B)  Efforts to stabilize only the value of foreign currencies 
C)  Long-term borrowing among countries 
D)  Short-term borrowing among countries

Question 15

Concerning international lending risk of commercial banks, ____ is closely related to political developments in a borrowing country, especially the government's views concerning international investments and loans.

Accepted Answer

A)  Economic risk 
B)  Credit risk 
C)  Country risk 
D)  Currency risk 
A)  Economic risk 
B)  Credit risk 
C)  Country risk 
D)  Currency risk

Question 16

Swap arrangements are bilateral agreements between central banks to allow countries to temporarily borrow funds to ease current-account deficits and discourage speculative capital flows.

Accepted Answer

A) True 
 B)False

Question 17

The diagram below represents the exchange market position of the United States in trade with the United Kingdom. Starting at the equilibrium exchange rate of $3 per pound, suppose the demand for pounds rises from DS1U1B10S1U1B0 to DS1U1B11S1U1B0.
Figure 17.1 Foreign Exchange Market
  
-In the market for British Pounds the demand is represented by D0 and supply by S0. If the exchange rate is fixed at $3 and the demand for pounds increases to D1, US monetary authorities will need to

Accepted Answer

A)  supply 8 million poundds to the market 
B)  supply 4 million pounds to the market 
C)  supply 2 million pounds to the market 
D)  do nothing 
A)  supply 8 million poundds to the market 
B)  supply 4 million pounds to the market 
C)  supply 2 million pounds to the market 
D)  do nothing

Question 18

In 1974 the United States revoked a 41-year ban on U.S. citizen's ownership of gold.

Accepted Answer

A) True 
 B)False

Question 19

The diagram below represents the exchange market position of the United States in trade with the United Kingdom. Starting at the equilibrium exchange rate of $3 per pound, suppose the demand for pounds rises from DS1U1B10S1U1B0 to DS1U1B11S1U1B0. 
Figure 17.1 Foreign Exchange Market
  
-Refer to Figure 17.1. If the exchange rate was allowed to rise to $4 per pound, U.S. monetary authorities would have to supply 6 million pounds to the foreign exchange market in exchange for dollars to maintain this rate.

Accepted Answer

A) True 
 B)False

Question 20

The greater a nation's propensity to apply tariffs and quotas to key sectors, the greater will be the need for international reserves.

Accepted Answer

A) True 
 B)False

Which of the following is $\underline { \text { not } }$ a condition of the international gold standard? That a nation must:

The U.S. dollar has been considered a reserve (key) currency because trading nations have been willing to hold it as an international reserve asset.

Gold is currently the most widely used asset in the international monetary system.

When granting loans to financially troubled nations, the International Monetary Fund requires some degree of conditionality, meaning that the borrowing nation must agree to implement economic policies as mandated by the IMF.

"Owned" international reserves consist of:

Because the value of the SDR is tied directly to the value of the U.S. dollar, a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.

Why do countries hold international reserves?

Which of the following assets was (were) created in 1970 to provide additional international liquidity, in the belief that increasing world trade requires more liquidity for larger expected payments imbalances?

Describe the eurocurrency market.

Which of the following is $\underline { \text { not } }$ considered an "owned" reserve?

Eurodollars are:

The U.S. gold $\underline { \text { outflow } }$ that began in the late 1940s and continued through the 1960s was due in part to:

To the extent that adjustments in prices, interest rates, and income levels promote balance-of-payments equilibrium, the demand for international reserves decreases.

The Federal Reserve's swap network represents:

Concerning international lending risk of commercial banks, ____ is closely related to political developments in a borrowing country, especially the government's views concerning international investments and loans.

Swap arrangements are bilateral agreements between central banks to allow countries to temporarily borrow funds to ease current-account deficits and discourage speculative capital flows.

In 1974 the United States revoked a 41-year ban on U.S. citizen's ownership of gold.

The greater a nation's propensity to apply tariffs and quotas to key sectors, the greater will be the need for international reserves.

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Adjustments and the Balance of Payments

Exchange-Rate Systems and Currency Crises

Macroeconomic Policy in an Open Economy

Filters

Exam 17: International Banking: Reserves, Debt, and Risk

Which of the following is not ‾\underline { \text { not } } not ​ a condition of the international gold standard? That a nation must:

The U.S. dollar has been considered a reserve (key) currency because trading nations have been willing to hold it as an international reserve asset.

Gold is currently the most widely used asset in the international monetary system.

When granting loans to financially troubled nations, the International Monetary Fund requires some degree of conditionality, meaning that the borrowing nation must agree to implement economic policies as mandated by the IMF.

"Owned" international reserves consist of:

Because the value of the SDR is tied directly to the value of the U.S. dollar, a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.

Why do countries hold international reserves?

Which of the following assets was (were) created in 1970 to provide additional international liquidity, in the belief that increasing world trade requires more liquidity for larger expected payments imbalances?

Describe the eurocurrency market.

Which of the following is not ‾\underline { \text { not } } not ​ considered an "owned" reserve?

Eurodollars are:

The U.S. gold outflow ‾\underline { \text { outflow } } outflow ​ that began in the late 1940s and continued through the 1960s was due in part to:

To the extent that adjustments in prices, interest rates, and income levels promote balance-of-payments equilibrium, the demand for international reserves decreases.

The Federal Reserve's swap network represents:

Concerning international lending risk of commercial banks, ____ is closely related to political developments in a borrowing country, especially the government's views concerning international investments and loans.

Swap arrangements are bilateral agreements between central banks to allow countries to temporarily borrow funds to ease current-account deficits and discourage speculative capital flows.

In 1974 the United States revoked a 41-year ban on U.S. citizen's ownership of gold.

The greater a nation's propensity to apply tariffs and quotas to key sectors, the greater will be the need for international reserves.

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Adjustments and the Balance of Payments

Exchange-Rate Systems and Currency Crises

Macroeconomic Policy in an Open Economy

Filters

Which of the following is $\underline { \text { not } }$ a condition of the international gold standard? That a nation must:

Which of the following is $\underline { \text { not } }$ considered an "owned" reserve?

The U.S. gold $\underline { \text { outflow } }$ that began in the late 1940s and continued through the 1960s was due in part to: