Exam 18: The International Financial System

The current international financial system is a managed float exchange rate system because

To keep from running out of international reserves under the Bretton Woods system,a country had to implement ________ monetary policy to ________ its currency.

A foreign exchange intervention with an offsetting open market operation that leaves the monetary base unchanged is called

Which of the following is NOT a disadvantage of controls on capital outflows?

Everything else held constant,if a central bank makes an unsterilized ________ of foreign assets,then the domestic money supply will decrease and the domestic currency will ________.

Under a fixed exchange rate regime,if a country has an ________ exchange rate,then its central bank's attempt to keep its currency from depreciating will result in a ________ of international reserves.

Under a gold standard in which one dollar could be turned in to the U.S. Treasury and exchanged for 1/20th of an ounce of gold and one Swiss Franc could be exchanged for 1/100th of an ounce of gold,an exchange rate of ________ francs to the dollar would stimulate a flow of gold from the United States to Switzerland.

Which of the following is NOT a disadvantage of exchange-rate targeting?

Under the Bretton Woods system,when a country adopted an expansionary monetary policy,thereby causing a balance of payments ________,the country would eventually be forced to implement ________ monetary policy.

If a central bank does not want to see its currency ________ in value,it may pursue contractionary monetary policy to raise the domestic interest rate,thereby ________ its currency.

The Bretton Woods agreement created the ________,which was given the task of promoting the growth of world trade by setting rules for the maintenance of fixed exchange rates and by making loans to countries that were experiencing balance of payments difficulties.

An international lender of last resort creates a serious moral hazard problem because ________ and other ________ of banking institutions expect that they will be protected if a crisis occurs.

Everything else held constant,if a central bank makes a sterilized purchase of foreign assets,then the domestic currency will

A monetary policy strategy that uses a fixed exchange rate regime that ties the value of a currency to the currency of a large,low inflation country is called ________ targeting.

A country that dollarizes

Under an exchange-rate targeting rule for monetary policy,a crawling peg

If a central bank does not want to see its currency fall in value,it may pursue ________ monetary policy to ________ the domestic interest rate,thereby strengthening its currency.

Under the current managed float exchange rate regime;countries with surpluses in their balance of payments frequently do not want to see their currencies appreciate because it makes their goods ________ expensive abroad and foreign goods ________ in their countries.

Capital ________ are American purchases of foreign assets,and capital ________ are foreign purchases of American assets.

The United States chooses to have ________ and ________ and therefore,cannot have a fixed exchange rate at the same time.