Question 1

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

Accepted Answer

A)  sell foreign assets and buy dollars. 
B)  sell dollars and buy foreign assets. 
C)  buy foreign assets and also buy dollars. 
D)  sell foreign assets and also sell dollars. 
A)  sell foreign assets and buy dollars. 
B)  sell dollars and buy foreign assets. 
C)  buy foreign assets and also buy dollars. 
D)  sell foreign assets and also sell dollars.

Question 2

In the balance-of-payments accounts,the statistical discrepancy

Accepted Answer

A)  equals the capital account balance minus the current account balance. 
B)  equals the current account balance minus the capital account balance. 
C)  probably reflects hidden capital flows. 
D)  must equal zero. 
A)  equals the capital account balance minus the current account balance. 
B)  equals the current account balance minus the capital account balance. 
C)  probably reflects hidden capital flows. 
D)  must equal zero.

Question 3

When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market,the process is called

Accepted Answer

A)  open market operations. 
B)  hedging. 
C)  sterilized intervention. 
D)  unsterilized intervention. 
A)  open market operations. 
B)  hedging. 
C)  sterilized intervention. 
D)  unsterilized intervention.

Question 4

The promise that was to hold the Bretton Woods system together was the agreement that

Accepted Answer

A)  no industrial country would allow high rates of inflation. 
B)  foreign central banks would be able to convert U.S. dollars into gold at a fixed price. 
C)  no country would raise tariffs on the products of other countries. 
D)  all countries would be willing to redeem their paper currencies for gold. 
A)  no industrial country would allow high rates of inflation. 
B)  foreign central banks would be able to convert U.S. dollars into gold at a fixed price. 
C)  no country would raise tariffs on the products of other countries. 
D)  all countries would be willing to redeem their paper currencies for gold.

Question 5

The policy trilemma is the hypothesis that it is impossible for a country to have all of the following at the same time EXCEPT

Accepted Answer

A)  exchange rate stability. 
B)  economic growth. 
C)  free capital flows. 
D)  monetary policy independence. 
A)  exchange rate stability. 
B)  economic growth. 
C)  free capital flows. 
D)  monetary policy independence.

Question 6

If a central bank wishes to lower the foreign-exchange value of its currency,it will

Accepted Answer

A)  buy domestic currency and sell foreign assets. 
B)  sell domestic currency and buy foreign assets. 
C)  attempt to raise domestic interest rates. 
D)  attempt to lower the domestic price level relative to foreign price levels. 
A)  buy domestic currency and sell foreign assets. 
B)  sell domestic currency and buy foreign assets. 
C)  attempt to raise domestic interest rates. 
D)  attempt to lower the domestic price level relative to foreign price levels.

Question 7

The exchange rate system followed by the United States is known as

Accepted Answer

A)  the gold standard. 
B)  a fixed exchange rate system. 
C)  a flexible exchange rate system. 
D)  a barter system. 
A)  the gold standard. 
B)  a fixed exchange rate system. 
C)  a flexible exchange rate system. 
D)  a barter system.

Question 8

If the Fed buys $2 billion of short-term securities issued by the government of Japan and pays for them by writing a check for $2 billion

Accepted Answer

A)  its assets will rise by $2 billion and its liabilities will fall by $2 billion. 
B)  its assets will fall by $2 billion and its liabilities will rise by $2 billion. 
C)  its assets and liabilities will both fall by $2 billion. 
D)  its assets and liabilities will both rise by $2 billion. 
A)  its assets will rise by $2 billion and its liabilities will fall by $2 billion. 
B)  its assets will fall by $2 billion and its liabilities will rise by $2 billion. 
C)  its assets and liabilities will both fall by $2 billion. 
D)  its assets and liabilities will both rise by $2 billion.

Question 9

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

Accepted Answer

Restrictions on capital inflows receive

Question 10

The Bretton Woods system was expected to be more stable than the gold standard because

Accepted Answer

A)  the world supply of gold had increased greatly by the time the Bretton Woods system was established. 
B)  large trade deficits and surpluses would be unlikely to occur under the Bretton Woods system. 
C)  fewer countries were involved in the Bretton Woods system than had been involved in the gold standard. 
D)  the IMF was set up to be a lender of last resort. 
A)  the world supply of gold had increased greatly by the time the Bretton Woods system was established. 
B)  large trade deficits and surpluses would be unlikely to occur under the Bretton Woods system. 
C)  fewer countries were involved in the Bretton Woods system than had been involved in the gold standard. 
D)  the IMF was set up to be a lender of last resort.

Question 11

Which of the following is TRUE of the U.S.balance of payments?

Accepted Answer

A)  It includes as receipts all inflows of funds from foreigners to the United States. 
B)  It includes as receipts only inflows of funds used to purchase U.S. produced goods and services. 
C)  It includes as receipts inflows of funds used to purchase U.S. goods or services or to acquire U.S. assets but not funds received as unilateral transfers. 
D)  It includes as receipts inflows of funds used to purchase U.S. goods or services and funds received as unilateral transfers but not inflows of funds used to acquire U.S. assets. 
A)  It includes as receipts all inflows of funds from foreigners to the United States. 
B)  It includes as receipts only inflows of funds used to purchase U.S. produced goods and services. 
C)  It includes as receipts inflows of funds used to purchase U.S. goods or services or to acquire U.S. assets but not funds received as unilateral transfers. 
D)  It includes as receipts inflows of funds used to purchase U.S. goods or services and funds received as unilateral transfers but not inflows of funds used to acquire U.S. assets.

Question 12

When the Fed sells foreign assets and buys domestic assets at the same time

Accepted Answer

A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected. 
A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected.

Question 13

The main reason central banks engage in foreign-exchange interventions is to

Accepted Answer

A)  stabilize the domestic money supply. 
B)  stabilize domestic interest rates. 
C)  stabilize foreign interest rates. 
D)  stabilize the exchange rate. 
A)  stabilize the domestic money supply. 
B)  stabilize domestic interest rates. 
C)  stabilize foreign interest rates. 
D)  stabilize the exchange rate.

Question 14

When a nation is said to be running a balance of payments surplus,this means its

Accepted Answer

A)  official settlements balance is positive. 
B)  trade balance is positive. 
C)  net financial account balance is positive. 
D)  current account is positive. 
A)  official settlements balance is positive. 
B)  trade balance is positive. 
C)  net financial account balance is positive. 
D)  current account is positive.

Question 15

Which of the following countries does NOT use the euro?

Accepted Answer

A)  Estonia 
B)  Belgium 
C)  Finland 
D)  United Kingdom 
A)  Estonia 
B)  Belgium 
C)  Finland 
D)  United Kingdom

Question 16

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

Accepted Answer

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

Question 17

When a central bank buys foreign assets

Accepted Answer

A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected. 
A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected.

Question 18

The speculative attack on the British pound in 1967 succeeded because

Accepted Answer

A)  the pound was seriously undervalued relative to the dollar. 
B)  Britain decided to drop out of the Bretton Woods system. 
C)  British exports greatly exceeded British imports, causing a large inflow of gold. 
D)  the Bank of England lacked the international reserves to defend the existing exchange rate indefinitely. 
A)  the pound was seriously undervalued relative to the dollar. 
B)  Britain decided to drop out of the Bretton Woods system. 
C)  British exports greatly exceeded British imports, causing a large inflow of gold. 
D)  the Bank of England lacked the international reserves to defend the existing exchange rate indefinitely.

Question 19

The fixed exchange rates of the Bretton Woods system were maintained

Accepted Answer

A)  by central bank interventions in the foreign-exchange market. 
B)  by the requirement that short-term interest rates be equalized in all participating countries. 
C)  by the requirement that long-term interest rates be equalized in all participating countries. 
D)  through the automatic workings of the foreign-exchange market. 
A)  by central bank interventions in the foreign-exchange market. 
B)  by the requirement that short-term interest rates be equalized in all participating countries. 
C)  by the requirement that long-term interest rates be equalized in all participating countries. 
D)  through the automatic workings of the foreign-exchange market.

Question 20

At the 1976 IMF conference in Jamaica

Accepted Answer

A)  the United States reaffirmed its commitment to buy and sell gold at a fixed price. 
B)  currencies were formally allowed to float. 
C)  the major countries of the world agreed to continue a system of fixed exchange rates. 
D)  the gold standard was reestablished. 
A)  the United States reaffirmed its commitment to buy and sell gold at a fixed price. 
B)  currencies were formally allowed to float. 
C)  the major countries of the world agreed to continue a system of fixed exchange rates. 
D)  the gold standard was reestablished.

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

In the balance-of-payments accounts,the statistical discrepancy

When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market,the process is called

The promise that was to hold the Bretton Woods system together was the agreement that

The policy trilemma is the hypothesis that it is impossible for a country to have all of the following at the same time EXCEPT

If a central bank wishes to lower the foreign-exchange value of its currency,it will

The exchange rate system followed by the United States is known as

If the Fed buys $2 billion of short-term securities issued by the government of Japan and pays for them by writing a check for $2 billion

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

The Bretton Woods system was expected to be more stable than the gold standard because

Which of the following is TRUE of the U.S.balance of payments?

When the Fed sells foreign assets and buys domestic assets at the same time

The main reason central banks engage in foreign-exchange interventions is to

When a nation is said to be running a balance of payments surplus,this means its

Which of the following countries does NOT use the euro?

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

When a central bank buys foreign assets

The speculative attack on the British pound in 1967 succeeded because

The fixed exchange rates of the Bretton Woods system were maintained

At the 1976 IMF conference in Jamaica

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

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

In the balance-of-payments accounts,the statistical discrepancy

When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market,the process is called

The promise that was to hold the Bretton Woods system together was the agreement that

The policy trilemma is the hypothesis that it is impossible for a country to have all of the following at the same time EXCEPT

If a central bank wishes to lower the foreign-exchange value of its currency,it will

The exchange rate system followed by the United States is known as

If the Fed buys $2 billion of short-term securities issued by the government of Japan and pays for them by writing a check for $2 billion

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

The Bretton Woods system was expected to be more stable than the gold standard because

Which of the following is TRUE of the U.S.balance of payments?

When the Fed sells foreign assets and buys domestic assets at the same time

The main reason central banks engage in foreign-exchange interventions is to

When a nation is said to be running a balance of payments surplus,this means its

Which of the following countries does NOT use the euro?

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

When a central bank buys foreign assets

The speculative attack on the British pound in 1967 succeeded because

The fixed exchange rates of the Bretton Woods system were maintained

At the 1976 IMF conference in Jamaica

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