Question 1

All of the following statements are true about the real exchange rate,given by the relation Rr = Rn ($ \frac{P^{*}}{P} $) ,except

Accepted Answer

A) a greater change in P (domestic price)compared to a change in $ P^{*} $1 (foreign price)necessitates a rise in the nominal rate, Rn ,to keep the real rate unchanged. 
B) a pegged exchange rate system requires tight control of the money supply. 
C) there is a one-to-one correspondence between the real and nominal exchange rates. 
D) an expansionary monetary policy raises the real exchange rate. 
E) the real exchange rate would be the same as the nominal exchange rate only if the difference between domestic and foreign inflation rates is zero. 
A) a greater change in P (domestic price)compared to a change in $ P^{*} $1 (foreign price)necessitates a rise in the nominal rate, Rn ,to keep the real rate unchanged. 
B) a pegged exchange rate system requires tight control of the money supply. 
C) there is a one-to-one correspondence between the real and nominal exchange rates. 
D) an expansionary monetary policy raises the real exchange rate. 
E) the real exchange rate would be the same as the nominal exchange rate only if the difference between domestic and foreign inflation rates is zero.

Question 2

The Basel Capital Accord does NOT include

Accepted Answer

A) requiring bank owners to invest into and have some capital ownership in the banks they own. 
B) supervision of banks by an oversight board. 
C) information disclosure designed to encourage market discipline. 
D) denying access to foreign capital by a country that defaults on its international loans. 
E) None of the above. 
A) requiring bank owners to invest into and have some capital ownership in the banks they own. 
B) supervision of banks by an oversight board. 
C) information disclosure designed to encourage market discipline. 
D) denying access to foreign capital by a country that defaults on its international loans. 
E) None of the above.

Question 3

Which of the following may NOT help avoid a financial crisis?

Accepted Answer

A) Maintaining credible and sustainable fiscal policies 
B) Regulation and supervision of the financial system 
C) Disclosure of timely information to lenders,investors,and depositors about key economic variables such as the central bank's holding of international reserves 
D) Immediately bailing out financial intermediaries and standing ready to bail out others in case a financial crisis occurs 
E) Maintaining credible and sustainable monetary policies 
A) Maintaining credible and sustainable fiscal policies 
B) Regulation and supervision of the financial system 
C) Disclosure of timely information to lenders,investors,and depositors about key economic variables such as the central bank's holding of international reserves 
D) Immediately bailing out financial intermediaries and standing ready to bail out others in case a financial crisis occurs 
E) Maintaining credible and sustainable monetary policies

Question 4

All of the following issues were discussed as options for reforming the international financial architecture except

Accepted Answer

A) how high an interest rate the lender of last resort should charge when it makes loans. 
B) the length of the payback period. 
C) the size of the loans. 
D) the moral hazard problem associated with a lender of last resort. 
E) if the lender of last resort (i.e. ,the IMF)should consult and collaborate with other international institutions such as the United Nations and the WTO. 
A) how high an interest rate the lender of last resort should charge when it makes loans. 
B) the length of the payback period. 
C) the size of the loans. 
D) the moral hazard problem associated with a lender of last resort. 
E) if the lender of last resort (i.e. ,the IMF)should consult and collaborate with other international institutions such as the United Nations and the WTO.

Question 5

An austerity policy is

Accepted Answer

A) an increase in the money supply. 
B) an expenditure reduction and expenditure switching policy. 
C) an expansionary fiscal policy accompanied by decreases in taxes,increases in expenditures,or both. 
D) an exchange rate switching policy from a fixed to a flexible exchange rate system. 
E) None of the above. 
A) an increase in the money supply. 
B) an expenditure reduction and expenditure switching policy. 
C) an expansionary fiscal policy accompanied by decreases in taxes,increases in expenditures,or both. 
D) an exchange rate switching policy from a fixed to a flexible exchange rate system. 
E) None of the above.

Question 6

Which of the following was NOT a cause or a characteristic of the 1994/95 Mexican peso crisis?

Accepted Answer

A) An overvalued exchange rate 
B) An inflow of large foreign portfolio capital 
C) The inability of the IMF,the world bank,and the NAFTA member countries (i.e. ,the United States and Canada)to predict the looming financial crisis 
D) Shifts by the world capital markets toward more conservative and risk-averse investments because of interest and exchange rate movements around the world 
E) High domestic investments with insufficient domestic savings 
A) An overvalued exchange rate 
B) An inflow of large foreign portfolio capital 
C) The inability of the IMF,the world bank,and the NAFTA member countries (i.e. ,the United States and Canada)to predict the looming financial crisis 
D) Shifts by the world capital markets toward more conservative and risk-averse investments because of interest and exchange rate movements around the world 
E) High domestic investments with insufficient domestic savings

Question 7

How did the global supply of savings impact the formation of the housing bubble?

Accepted Answer

Interest rates were

Question 8

All of the following are possible outcomes of a financial crisis except

Accepted Answer

A) bank failings and disintermediation. 
B) decreases in investment. 
C) a recession. 
D) a sure competitive advantage accompanied by a comparative advantage. 
E) depreciation or devaluation of a currency. 
A) bank failings and disintermediation. 
B) decreases in investment. 
C) a recession. 
D) a sure competitive advantage accompanied by a comparative advantage. 
E) depreciation or devaluation of a currency.

Question 9

Many developing countries make the government budget one of the primary tools of long-run industrial development,with the government owning and operating industries such as steel mills,airlines,and phone companies.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is NOT likely to occur when a bank fails?

Accepted Answer

A) Everyone that deposits money in the bank loses all or a portion of their money,unless the country has a functioning deposit insurance system. 
B) The loss of savings (or the feared loss of savings)causes households to cut back on consumption,which spreads the recessionary effect wider through the country. 
C) Unaffected banks may stop making loans as they take a cautious approach,slowing or stopping new investment. 
D) Layoffs occur and the economy falls deeper into a downward spiraling inflation. 
E) Other banks make too many loans to make up for the loans not made by the failed bank,kicking off a cycle of stimulation and inflation. 
A) Everyone that deposits money in the bank loses all or a portion of their money,unless the country has a functioning deposit insurance system. 
B) The loss of savings (or the feared loss of savings)causes households to cut back on consumption,which spreads the recessionary effect wider through the country. 
C) Unaffected banks may stop making loans as they take a cautious approach,slowing or stopping new investment. 
D) Layoffs occur and the economy falls deeper into a downward spiraling inflation. 
E) Other banks make too many loans to make up for the loans not made by the failed bank,kicking off a cycle of stimulation and inflation.

Question 11

Tax systems in developing countries tend to be efficient and reliable.

Accepted Answer

A) True 
 B)False

Question 12

A debt crisis may lead to a banking crisis.

Accepted Answer

A) True 
 B)False

Question 13

A flexible exchange rate system crisis involves

Accepted Answer

A) a revaluation of the currency. 
B) a rapid and uncontrolled depreciation of the currency. 
C) a decrease in the dollar value of the country's international debt. 
D) a sure political collapse of the ruling government. 
E) All of the above. 
A) a revaluation of the currency. 
B) a rapid and uncontrolled depreciation of the currency. 
C) a decrease in the dollar value of the country's international debt. 
D) a sure political collapse of the ruling government. 
E) All of the above.

Question 14

Disintermediation is a problem associated with a banking crisis.

Accepted Answer

A) True 
 B)False

All of the following statements are true about the real exchange rate,given by the relation R_r = R_n ( $\frac{P^{*}}{P}$ ) ,except

The Basel Capital Accord does NOT include

Which of the following may NOT help avoid a financial crisis?

All of the following issues were discussed as options for reforming the international financial architecture except

An austerity policy is

Which of the following was NOT a cause or a characteristic of the 1994/95 Mexican peso crisis?

How did the global supply of savings impact the formation of the housing bubble?

All of the following are possible outcomes of a financial crisis except

Many developing countries make the government budget one of the primary tools of long-run industrial development,with the government owning and operating industries such as steel mills,airlines,and phone companies.

Which of the following is NOT likely to occur when a bank fails?

Tax systems in developing countries tend to be efficient and reliable.

A debt crisis may lead to a banking crisis.

A flexible exchange rate system crisis involves

Disintermediation is a problem associated with a banking crisis.

The United States in a Global Economy

International Economic Institutions Since World War Ii

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

Exchange Rates and Exchange Rate Systems

An Introduction to Open Economy Macroeconomics

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

The Bric Countries in the World Economy

Filters

Exam 12: International Financial Crises

All of the following statements are true about the real exchange rate,given by the relation Rr = Rn ( P∗P \frac{P^{*}}{P} PP∗​ ) ,except

The Basel Capital Accord does NOT include

Which of the following may NOT help avoid a financial crisis?

All of the following issues were discussed as options for reforming the international financial architecture except

An austerity policy is

Which of the following was NOT a cause or a characteristic of the 1994/95 Mexican peso crisis?

How did the global supply of savings impact the formation of the housing bubble?

All of the following are possible outcomes of a financial crisis except

Many developing countries make the government budget one of the primary tools of long-run industrial development,with the government owning and operating industries such as steel mills,airlines,and phone companies.

Which of the following is NOT likely to occur when a bank fails?

Tax systems in developing countries tend to be efficient and reliable.

A debt crisis may lead to a banking crisis.

A flexible exchange rate system crisis involves

Disintermediation is a problem associated with a banking crisis.

The United States in a Global Economy

International Economic Institutions Since World War Ii

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

Exchange Rates and Exchange Rate Systems

An Introduction to Open Economy Macroeconomics

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

The Bric Countries in the World Economy

Filters

All of the following statements are true about the real exchange rate,given by the relation R_r = R_n ( $\frac{P^{*}}{P}$ ) ,except