Question 1

Are international reserve needs different for different exchange rate regimes?

Accepted Answer

The need for international reserves tend

Question 2

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. Under a floating exchange rate system, the exchange rate would rise to $4 and U.S. monetary authorities would have to supply 4 million pounds to the foreign exchange market in exchange for dollars to maintain this rate.

Accepted Answer

A) True 
 B)False

Question 3

Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?

Accepted Answer

A)  Conditionality 
B)  Debt service 
C)  Reciprocal currency arrangement 
D)  Swap agreement 
A)  Conditionality 
B)  Debt service 
C)  Reciprocal currency arrangement 
D)  Swap agreement

Question 4

Gold constitutes the largest component of the world's international reserves.

Accepted Answer

A) True 
 B)False

Question 5

The supply of international reserves consists of owned reserves and borrowed reserves.

Accepted Answer

A) True 
 B)False

Question 6

"Borrowed" international reserves consist of:

Accepted Answer

A)  IMF drawings 
B)  Foreign currencies 
C)  Gold 
D)  Special drawing rights 
A)  IMF drawings 
B)  Foreign currencies 
C)  Gold 
D)  Special drawing rights

Question 7

A nation may experience debt-servicing problems because of

Accepted Answer

A)  Pursuit of improper macroeconomic policies 
B)  Inadequate borrowing 
C)  Adverse economic events 
D)  Both a and c 
A)  Pursuit of improper macroeconomic policies 
B)  Inadequate borrowing 
C)  Adverse economic events 
D)  Both a and c

Question 8

Concerning international lending risk, country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

Accepted Answer

A) True 
 B)False

Question 9

The demand for international reserves tend to increase with the level of world income and trade activity.

Accepted Answer

A) True 
 B)False

Question 10

The demand for international reserves is negatively related to the level of world prices and income.

Accepted Answer

A) True 
 B)False

Question 11

In 1975 the official price of gold was abolished as the unit of account for the international monetary system. As a result, gold was demonetized as an international reserve asset.

Accepted Answer

A) True 
 B)False

Question 12

A goal of the International Monetary Fund is to make short-term loans to member nations so as to allow them to correct balance of payments disequilibriums without resorting to measures that would destroy national prosperity.

Accepted Answer

A) True 
 B)False

Question 13

To reduce losses on developing country loans, commercial banks sometimes sell their loans, at a discount, to a developing country government for local currency which is then used to finance purchases of ownership shares in developing country industries. This practice is known as:

Accepted Answer

A)  Debt forgiveness 
B)  Debt buyback 
C)  Debt-for-debt swap 
D)  Debt/equity swap 
A)  Debt forgiveness 
B)  Debt buyback 
C)  Debt-for-debt swap 
D)  Debt/equity swap

Question 14

To reduce their exposure to developing country debt, lending commercial banks have practiced all of the following $\underline {  \text { except: }  }$:

Accepted Answer

A)  Making outright loan sales to other commercial banks 
B)  Reducing their capital base as a cushion against losses 
C)  Dealing in debt-for-debt swaps with foreign governments 
D)  Dealing in debt/equity swaps with foreign governments 
A)  Making outright loan sales to other commercial banks 
B)  Reducing their capital base as a cushion against losses 
C)  Dealing in debt-for-debt swaps with foreign governments 
D)  Dealing in debt/equity swaps with foreign governments

Question 15

Foreign currencies constitute the smallest component of the world's international reserves.

Accepted Answer

A) True 
 B)False

Question 16

The exchange of borrowing country debt for an ownership position in the borrowing country is known as:

Accepted Answer

A)  Debt forgiveness 
B)  Debt-for-debt swap 
C)  Debt reduction 
D)  Debt/equity swap 
A)  Debt forgiveness 
B)  Debt-for-debt swap 
C)  Debt reduction 
D)  Debt/equity swap

Are international reserve needs different for different exchange rate regimes?

Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?

Gold constitutes the largest component of the world's international reserves.

The supply of international reserves consists of owned reserves and borrowed reserves.

"Borrowed" international reserves consist of:

A nation may experience debt-servicing problems because of

Concerning international lending risk, country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

The demand for international reserves tend to increase with the level of world income and trade activity.

The demand for international reserves is negatively related to the level of world prices and income.

In 1975 the official price of gold was abolished as the unit of account for the international monetary system. As a result, gold was demonetized as an international reserve asset.

A goal of the International Monetary Fund is to make short-term loans to member nations so as to allow them to correct balance of payments disequilibriums without resorting to measures that would destroy national prosperity.

To reduce losses on developing country loans, commercial banks sometimes sell their loans, at a discount, to a developing country government for local currency which is then used to finance purchases of ownership shares in developing country industries. This practice is known as:

To reduce their exposure to developing country debt, lending commercial banks have practiced all of the following $\underline { \text { except: } }$ :

Foreign currencies constitute the smallest component of the world's international reserves.

The exchange of borrowing country debt for an ownership position in the borrowing country is known as:

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

Are international reserve needs different for different exchange rate regimes?

Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?

Gold constitutes the largest component of the world's international reserves.

The supply of international reserves consists of owned reserves and borrowed reserves.

"Borrowed" international reserves consist of:

A nation may experience debt-servicing problems because of

Concerning international lending risk, country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

The demand for international reserves tend to increase with the level of world income and trade activity.

The demand for international reserves is negatively related to the level of world prices and income.

In 1975 the official price of gold was abolished as the unit of account for the international monetary system. As a result, gold was demonetized as an international reserve asset.

A goal of the International Monetary Fund is to make short-term loans to member nations so as to allow them to correct balance of payments disequilibriums without resorting to measures that would destroy national prosperity.

To reduce losses on developing country loans, commercial banks sometimes sell their loans, at a discount, to a developing country government for local currency which is then used to finance purchases of ownership shares in developing country industries. This practice is known as:

To reduce their exposure to developing country debt, lending commercial banks have practiced all of the following except: ‾\underline { \text { except: } } except: ​ :

Foreign currencies constitute the smallest component of the world's international reserves.

The exchange of borrowing country debt for an ownership position in the borrowing country is known as:

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

To reduce their exposure to developing country debt, lending commercial banks have practiced all of the following $\underline { \text { except: } }$ :