Question 1

Why has the IMF come in for widespread criticism for its handling of the Asian financial crisis?

Accepted Answer

A)  It refused to make loans to any of the countries whose currencies were under speculative attack. 
B)  Its policies did not sufficiently punish speculators with losses, giving rise to moral hazard. 
C)  Its policies led to unsustainably low interest rates in a number of Asian countries. 
D)  Its policies failed to lead to sufficient hardship for citizens in a number of Asian countries, giving rise to moral hazard. 
A)  It refused to make loans to any of the countries whose currencies were under speculative attack. 
B)  Its policies did not sufficiently punish speculators with losses, giving rise to moral hazard. 
C)  Its policies led to unsustainably low interest rates in a number of Asian countries. 
D)  Its policies failed to lead to sufficient hardship for citizens in a number of Asian countries, giving rise to moral hazard. B

Question 2

An unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency will result in

Accepted Answer

A)  higher domestic interest rates. 
B)  lower domestic interest rates. 
C)  an increase in the money supply. 
D)  lower domestic interest rates and an increase in the money supply. 
A)  higher domestic interest rates. 
B)  lower domestic interest rates. 
C)  an increase in the money supply. 
D)  lower domestic interest rates and an increase in the money supply. A

Question 3

A sale of foreign assets by a central bank has the same effect on the monetary base as

Accepted Answer

A)  a decrease in the discount rate. 
B)  a decrease in the required reserve ratio. 
C)  an open market sale of government bonds. 
D)  an open market purchase of government bonds. 
A)  a decrease in the discount rate. 
B)  a decrease in the required reserve ratio. 
C)  an open market sale of government bonds. 
D)  an open market purchase of government bonds. C

Question 4

Currently,the dominant reserve currency is the

Accepted Answer

A)  U.S. dollar. 
B)  Japanese yen. 
C)  euro. 
D)  British pound. 
A)  U.S. dollar. 
B)  Japanese yen. 
C)  euro. 
D)  British pound.

Question 5

Members of the European Exchange Rate Mechanism (ERM)

Accepted Answer

A)  agreed to buy and sell gold at a fixed rate. 
B)  promised to maintain the values of their currencies within a fixed range. 
C)  attempted to maintain a fixed exchange rate against the dollar. 
D)  all agreed to charge the same interest rate on central bank loans. 
A)  agreed to buy and sell gold at a fixed rate. 
B)  promised to maintain the values of their currencies within a fixed range. 
C)  attempted to maintain a fixed exchange rate against the dollar. 
D)  all agreed to charge the same interest rate on central bank loans.

Question 6

Which of the following three goals that make up the policy trilemma can be achieved at the same time in the eurozone countries?

Accepted Answer

A)  exchange rate stability and free capital flows 
B)  monetary policy independence and exchange rate stability 
C)  free capital flows and monetary policy independence 
D)  exchange rate stability, free capital flows, and monetary policy independence 
A)  exchange rate stability and free capital flows 
B)  monetary policy independence and exchange rate stability 
C)  free capital flows and monetary policy independence 
D)  exchange rate stability, free capital flows, and monetary policy independence

Question 7

If the Fed wants to increase the value of the dollar,it will

Accepted Answer

A)  sell foreign securities and buy dollars in international currency markets. 
B)  buy foreign securities and sell dollars in international currency markets. 
C)  buy foreign securities and also buy dollars in international currency markets. 
D)  sell foreign securities and also sell dollars in international currency markets. 
A)  sell foreign securities and buy dollars in international currency markets. 
B)  buy foreign securities and sell dollars in international currency markets. 
C)  buy foreign securities and also buy dollars in international currency markets. 
D)  sell foreign securities and also sell dollars in international currency markets.

Question 8

Why do some economists think a global savings glut contributed to the U.S.running a current account deficit in the 2000s?

Accepted Answer

Several developing economies in Asia and

Question 9

The euro is

Accepted Answer

A)  the currency of all nations in Europe. 
B)  the rate at which the French central bank makes discount loans. 
C)  a common currency of many European countries. 
D)  the name of the European central bank. 
A)  the currency of all nations in Europe. 
B)  the rate at which the French central bank makes discount loans. 
C)  a common currency of many European countries. 
D)  the name of the European central bank.

Question 10

Under the Bretton Woods system,exchange rates were supposed to be adjusted

Accepted Answer

A)  only when a country experienced fundamental disequilibrium. 
B)  daily. 
C)  weekly. 
D)  following each annual meeting of the board of governors of the International Monetary Fund. 
A)  only when a country experienced fundamental disequilibrium. 
B)  daily. 
C)  weekly. 
D)  following each annual meeting of the board of governors of the International Monetary Fund.

Question 11

When a central bank buys foreign assets

Accepted Answer

A)  its holdings of foreign assets rise by the amount of the purchase, but the monetary base is unaffected. 
B)  its holdings of foreign assets and the monetary base rise by the amount of the purchase. 
C)  its holdings of foreign assets rise by the amount of the purchase, and the monetary base rises by the amount of the purchase times the money multiplier. 
D)  the monetary base falls by the amount of the purchase. 
A)  its holdings of foreign assets rise by the amount of the purchase, but the monetary base is unaffected. 
B)  its holdings of foreign assets and the monetary base rise by the amount of the purchase. 
C)  its holdings of foreign assets rise by the amount of the purchase, and the monetary base rises by the amount of the purchase times the money multiplier. 
D)  the monetary base falls by the amount of the purchase.

Question 12

In 2012,the European Central Bank bought the debt of which nation?

Accepted Answer

A)  the United States 
B)  France 
C)  Spain 
D)  Germany 
A)  the United States 
B)  France 
C)  Spain 
D)  Germany

Question 13

If a nation's current account is -$200 billion and its financial account (excluding its official settlements balance)is $175 billion,how much is its official settlements balance?

Accepted Answer

A)  $375 billion 
B)  $25 billion 
C)  -$25 billion 
D)  -$ 375 billion 
A)  $375 billion 
B)  $25 billion 
C)  -$25 billion 
D)  -$ 375 billion

Question 14

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

Accepted Answer

A)  Domestic interest rates will rise. 
B)  The foreign-exchange value of the domestic currency will rise. 
C)  The central bank will experience a decrease in international reserves. 
D)  The domestic money supply will rise. 
A)  Domestic interest rates will rise. 
B)  The foreign-exchange value of the domestic currency will rise. 
C)  The central bank will experience a decrease in international reserves. 
D)  The domestic money supply will rise.

Question 15

If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency

Accepted Answer

A)  the central bank's holdings of international reserves will fall. 
B)  the domestic money supply will rise. 
C)  domestic interest rates will fall. 
D)  it will buy foreign assets. 
A)  the central bank's holdings of international reserves will fall. 
B)  the domestic money supply will rise. 
C)  domestic interest rates will fall. 
D)  it will buy foreign assets.

Question 16

Having a common currency in most of Europe has made it easier for all of the following EXCEPT

Accepted Answer

A)  households to buy across borders. 
B)  businesses to sell across borders. 
C)  households and firms to invest across borders. 
D)  countries to allow their currencies to depreciate to spur exports. 
A)  households to buy across borders. 
B)  businesses to sell across borders. 
C)  households and firms to invest across borders. 
D)  countries to allow their currencies to depreciate to spur exports.

Question 17

What was the approximate value of the U.S.current account balance in 2015?

Accepted Answer

A)  $79 billion 
B)  $10 billion 
C)  -$380 billion 
D)  -$463 billion 
A)  $79 billion 
B)  $10 billion 
C)  -$380 billion 
D)  -$463 billion

Question 18

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

Accepted Answer

A)  a country experiencing a balance of payments surplus was limited in its ability to defend its exchange rate by its stock of international reserves. 
B)  a country experiencing a balance of payments deficit was limited in its ability to defend its exchange rate by its stock of international reserves. 
C)  central banks were allowed by the IMF to adjust their exchange rates upward whenever they chose, but were rarely allowed to adjust their exchange rates downward. 
D)  central banks were allowed by the IMF to adjust their exchange rates downward whenever they chose, but were rarely allowed to adjust their exchange rates upward. 
A)  a country experiencing a balance of payments surplus was limited in its ability to defend its exchange rate by its stock of international reserves. 
B)  a country experiencing a balance of payments deficit was limited in its ability to defend its exchange rate by its stock of international reserves. 
C)  central banks were allowed by the IMF to adjust their exchange rates upward whenever they chose, but were rarely allowed to adjust their exchange rates downward. 
D)  central banks were allowed by the IMF to adjust their exchange rates downward whenever they chose, but were rarely allowed to adjust their exchange rates upward.

Question 19

If the Fed sells foreign assets,the monetary base will

Accepted Answer

A)  fall by the amount of the sale, only if the Fed buys domestic bank deposits with the proceeds. 
B)  fall by the amount of the sale, only if the Fed buys domestic currency with the proceeds. 
C)  fall by the amount of the sale, whether the Fed buys domestic bank deposits or domestic currency with the proceeds. 
D)  rise by the amount of the sale. 
A)  fall by the amount of the sale, only if the Fed buys domestic bank deposits with the proceeds. 
B)  fall by the amount of the sale, only if the Fed buys domestic currency with the proceeds. 
C)  fall by the amount of the sale, whether the Fed buys domestic bank deposits or domestic currency with the proceeds. 
D)  rise by the amount of the sale.

Question 20

Why may a central bank intervene in the foreign exchange market when its currency is appreciating?

Accepted Answer

A)  concerns about the country's exports becoming less competitive 
B)  concerns about inflation 
C)  concerns about imports becoming less competitive 
D)  to sterilize the effects on the domestic economy 
A)  concerns about the country's exports becoming less competitive 
B)  concerns about inflation 
C)  concerns about imports becoming less competitive 
D)  to sterilize the effects on the domestic economy

Why has the IMF come in for widespread criticism for its handling of the Asian financial crisis?

An unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency will result in

A sale of foreign assets by a central bank has the same effect on the monetary base as

Currently,the dominant reserve currency is the

Members of the European Exchange Rate Mechanism (ERM)

Which of the following three goals that make up the policy trilemma can be achieved at the same time in the eurozone countries?

If the Fed wants to increase the value of the dollar,it will

Why do some economists think a global savings glut contributed to the U.S.running a current account deficit in the 2000s?

The euro is

Under the Bretton Woods system,exchange rates were supposed to be adjusted

When a central bank buys foreign assets

In 2012,the European Central Bank bought the debt of which nation?

If a nation's current account is -$200 billion and its financial account (excluding its official settlements balance)is $175 billion,how much is its official settlements balance?

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency

Having a common currency in most of Europe has made it easier for all of the following EXCEPT

What was the approximate value of the U.S.current account balance in 2015?

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

If the Fed sells foreign assets,the monetary base will

Why may a central bank intervene in the foreign exchange market when its currency is appreciating?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 16: The International Financial System and Monetary Policy

Why has the IMF come in for widespread criticism for its handling of the Asian financial crisis?

An unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency will result in

A sale of foreign assets by a central bank has the same effect on the monetary base as

Currently,the dominant reserve currency is the

Members of the European Exchange Rate Mechanism (ERM)

Which of the following three goals that make up the policy trilemma can be achieved at the same time in the eurozone countries?

If the Fed wants to increase the value of the dollar,it will

Why do some economists think a global savings glut contributed to the U.S.running a current account deficit in the 2000s?

The euro is

Under the Bretton Woods system,exchange rates were supposed to be adjusted

When a central bank buys foreign assets

In 2012,the European Central Bank bought the debt of which nation?

If a nation's current account is -$200 billion and its financial account (excluding its official settlements balance)is $175 billion,how much is its official settlements balance?

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency

Having a common currency in most of Europe has made it easier for all of the following EXCEPT

What was the approximate value of the U.S.current account balance in 2015?

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

If the Fed sells foreign assets,the monetary base will

Why may a central bank intervene in the foreign exchange market when its currency is appreciating?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters