Question 1

One reason for the controversy surrounding the decision by the European Central Bank to buy Greek bonds was that

Accepted Answer

A)  it may increase moral hazard by encouraging other European governments to issue more debt than private investors were willing to buy. 
B)  it may increase adverse selection by encouraging other European governments to issue more debt than private investors were willing to buy. 
C)  it may result in higher risk premiums as private investors anticipate a default by Greece. 
D)  it may worsen the Greek recession by increasing Greek interest rates. 
A)  it may increase moral hazard by encouraging other European governments to issue more debt than private investors were willing to buy. 
B)  it may increase adverse selection by encouraging other European governments to issue more debt than private investors were willing to buy. 
C)  it may result in higher risk premiums as private investors anticipate a default by Greece. 
D)  it may worsen the Greek recession by increasing Greek interest rates.

Question 2

Discuss the problems associated with the imposition of capital controls.

Accepted Answer

First,with capital controls,domestic fir

Question 3

How did the global savings glut in the 2000s affect the U.S.current account balance?

Accepted Answer

A)  It caused it to decline by increasing the value of the dollar. 
B)  It caused it to decline by reducing the value of the dollar. 
C)  It caused it to increase by increasing the value of the dollar. 
D)  It caused it to increase by reducing the value of the dollar. 
A)  It caused it to decline by increasing the value of the dollar. 
B)  It caused it to decline by reducing the value of the dollar. 
C)  It caused it to increase by increasing the value of the dollar. 
D)  It caused it to increase by reducing the value of the dollar.

Question 4

On August 15,1971,the United States

Accepted Answer

A)  returned to the gold standard. 
B)  suspended the convertibility of dollars into gold. 
C)  provided unlimited dollar reserves to the German central bank to help end a speculative attack on the mark. 
D)  provided unlimited dollar reserves to the Bank of England to help end a speculative attack on the pound. 
A)  returned to the gold standard. 
B)  suspended the convertibility of dollars into gold. 
C)  provided unlimited dollar reserves to the German central bank to help end a speculative attack on the mark. 
D)  provided unlimited dollar reserves to the Bank of England to help end a speculative attack on the pound.

Question 5

International reserves are

Accepted Answer

A)  assets denominated in a foreign currency and used in international transactions. 
B)  reserves the Fed requires banks to hold against Eurodollar deposits. 
C)  reserves the International Monetary Fund requires banks to hold if they wish to participate in the market for foreign exchange. 
D)  central bank holdings of gold. 
A)  assets denominated in a foreign currency and used in international transactions. 
B)  reserves the Fed requires banks to hold against Eurodollar deposits. 
C)  reserves the International Monetary Fund requires banks to hold if they wish to participate in the market for foreign exchange. 
D)  central bank holdings of gold.

Question 6

All of the following accurately describe China's currency peg EXCEPT

Accepted Answer

A)  pegging against the dollar ensured that Chinese exporters faced stable prices on exports to the United States. 
B)  to support the exchange rate, the People's Bank of China had to buy large amounts of dollars with yuan. 
C)  the Chinese currency was allowed to depreciate moderately in the years preceding the financial crisis. 
D)  many economists argued that the Chinese currency was undervalued. 
A)  pegging against the dollar ensured that Chinese exporters faced stable prices on exports to the United States. 
B)  to support the exchange rate, the People's Bank of China had to buy large amounts of dollars with yuan. 
C)  the Chinese currency was allowed to depreciate moderately in the years preceding the financial crisis. 
D)  many economists argued that the Chinese currency was undervalued.

Question 7

What is the policy trilemma?

Accepted Answer

The policy trilemma is the hypothesis th

Question 8

A central bank may be reluctant to see its currency appreciate because

Accepted Answer

A)  rising prices of imports will contribute to inflation. 
B)  falling prices of exports will contribute to inflation. 
C)  the country's goods may become uncompetitive in world markets. 
D)  the country's monetary base will increase. 
A)  rising prices of imports will contribute to inflation. 
B)  falling prices of exports will contribute to inflation. 
C)  the country's goods may become uncompetitive in world markets. 
D)  the country's monetary base will increase.

Question 9

The current account balance plus the financial account balance

Accepted Answer

A)  equals the trade balance. 
B)  equals the net outflow of currency from the domestic economy. 
C)  will be negative during economic expansions and positive during economic contractions. 
D)  equals zero. 
A)  equals the trade balance. 
B)  equals the net outflow of currency from the domestic economy. 
C)  will be negative during economic expansions and positive during economic contractions. 
D)  equals zero.

Question 10

Fixed exchange rate regimes

Accepted Answer

A)  existed prior to the nineteenth century but were then superseded by the gold standard. 
B)  lower the transactions costs of buying and selling goods and assets. 
C)  result in higher world interest rates. 
D)  were first established by the GATT in 1971. 
A)  existed prior to the nineteenth century but were then superseded by the gold standard. 
B)  lower the transactions costs of buying and selling goods and assets. 
C)  result in higher world interest rates. 
D)  were first established by the GATT in 1971.

Question 11

If the Fed sterilizes the purchase of foreign assets

Accepted Answer

A)  the monetary base is left unchanged. 
B)  the monetary base rises by the amount of the purchase. 
C)  the monetary base falls by the amount of the purchase. 
D)  the monetary base may rise, fall, or remain unchanged depending on the reaction of domestic interest rates to the purchase. 
A)  the monetary base is left unchanged. 
B)  the monetary base rises by the amount of the purchase. 
C)  the monetary base falls by the amount of the purchase. 
D)  the monetary base may rise, fall, or remain unchanged depending on the reaction of domestic interest rates to the purchase.

Question 12

Suppose that Ruritania has a fixed exchange rate versus the U.S.dollar.If foreign investors become convinced that the Ruritanian currency is overvalued,what actions might they take to profit from this conviction? Would these actions make it easier or harder for Ruritania to maintain the value of its currency versus the dollar? Why?

Accepted Answer

Foreign investors will want to sell Ruri

Question 13

A nation with an official settlements balance of -$100 billion is likely to experience a

Accepted Answer

A)  balance of payments surplus and accumulate $100 billion in international reserves. 
B)  balance of payments deficit and accumulate $100 billion in international reserves. 
C)  balance of payments surplus and a decline of $100 billion in international reserves. 
D)  balance of payments deficit and a decline of $100 billion in international reserves. 
A)  balance of payments surplus and accumulate $100 billion in international reserves. 
B)  balance of payments deficit and accumulate $100 billion in international reserves. 
C)  balance of payments surplus and a decline of $100 billion in international reserves. 
D)  balance of payments deficit and a decline of $100 billion in international reserves.

Question 14

Under the Bretton Woods system the international reserve currency was the

Accepted Answer

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

Question 15

The Bretton Woods system lasted from

Accepted Answer

A)  1801 to 1861. 
B)  1863 to 1914. 
C)  1945 to 1971. 
D)  1981 to 1993. 
A)  1801 to 1861. 
B)  1863 to 1914. 
C)  1945 to 1971. 
D)  1981 to 1993.

Question 16

Which of the following is NOT considered a receipt in the balance of payments?

Accepted Answer

A)  exports of goods 
B)  capital inflows 
C)  import of services 
D)  unilateral transfers to U.S. citizens 
A)  exports of goods 
B)  capital inflows 
C)  import of services 
D)  unilateral transfers to U.S. citizens

Question 17

The speculative attack on the German mark in 1971 resulted in

Accepted Answer

A)  a large increase in the German monetary base. 
B)  a decline in the value of the mark relative to the dollar. 
C)  a decision to end the floating of the mark against the dollar. 
D)  a large decrease in the German monetary base. 
A)  a large increase in the German monetary base. 
B)  a decline in the value of the mark relative to the dollar. 
C)  a decision to end the floating of the mark against the dollar. 
D)  a large decrease in the German monetary base.

Question 18

Make use of a graph of the foreign exchange market to show how the Central Bank of Mexico can use an unsterilized intervention to increase the value of its currency,the peso,in terms of the dollar.

Accepted Answer

An unsterilized intervention by the cent

Question 19

How would monetary easing by the Swiss National Bank affect the value of the franc?

Accepted Answer

A)  It increases it since more people will take out loans at the low interest rates. 
B)  It reduces it since it reduces demand for francs since Swiss interest rates are now lower. 
C)  It increases it since it increases demand for francs since Swiss interest rates are now higher. 
D)  It reduces it since the supply of francs on the foreign exchange market is now lower. 
A)  It increases it since more people will take out loans at the low interest rates. 
B)  It reduces it since it reduces demand for francs since Swiss interest rates are now lower. 
C)  It increases it since it increases demand for francs since Swiss interest rates are now higher. 
D)  It reduces it since the supply of francs on the foreign exchange market is now lower.

Question 20

Deliberate actions by a central bank to influence the exchange rate are known as

Accepted Answer

A)  current account actions. 
B)  foreign-exchange market interventions. 
C)  dollar-value operations. 
D)  foreign-commerce maneuvers. 
A)  current account actions. 
B)  foreign-exchange market interventions. 
C)  dollar-value operations. 
D)  foreign-commerce maneuvers.

One reason for the controversy surrounding the decision by the European Central Bank to buy Greek bonds was that

Discuss the problems associated with the imposition of capital controls.

How did the global savings glut in the 2000s affect the U.S.current account balance?

On August 15,1971,the United States

International reserves are

All of the following accurately describe China's currency peg EXCEPT

What is the policy trilemma?

A central bank may be reluctant to see its currency appreciate because

The current account balance plus the financial account balance

Fixed exchange rate regimes

If the Fed sterilizes the purchase of foreign assets

A nation with an official settlements balance of -$100 billion is likely to experience a

Under the Bretton Woods system the international reserve currency was the

The Bretton Woods system lasted from

Which of the following is NOT considered a receipt in the balance of payments?

The speculative attack on the German mark in 1971 resulted in

Make use of a graph of the foreign exchange market to show how the Central Bank of Mexico can use an unsterilized intervention to increase the value of its currency,the peso,in terms of the dollar.

How would monetary easing by the Swiss National Bank affect the value of the franc?

Deliberate actions by a central bank to influence the exchange rate are known as

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

One reason for the controversy surrounding the decision by the European Central Bank to buy Greek bonds was that

Discuss the problems associated with the imposition of capital controls.

How did the global savings glut in the 2000s affect the U.S.current account balance?

On August 15,1971,the United States

International reserves are

All of the following accurately describe China's currency peg EXCEPT

What is the policy trilemma?

A central bank may be reluctant to see its currency appreciate because

The current account balance plus the financial account balance

Fixed exchange rate regimes

If the Fed sterilizes the purchase of foreign assets

A nation with an official settlements balance of -$100 billion is likely to experience a

Under the Bretton Woods system the international reserve currency was the

The Bretton Woods system lasted from

Which of the following is NOT considered a receipt in the balance of payments?

The speculative attack on the German mark in 1971 resulted in

Make use of a graph of the foreign exchange market to show how the Central Bank of Mexico can use an unsterilized intervention to increase the value of its currency,the peso,in terms of the dollar.

How would monetary easing by the Swiss National Bank affect the value of the franc?

Deliberate actions by a central bank to influence the exchange rate are known as

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