Exam 18: The International Financial System

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

If a central bank does not want to allow the domestic currency to depreciate,it will ________ international reserves by purchasing its currency,thereby ________ the monetary base and increasing the risk of higher unemployment.

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.

A central bank's attempt to prevent an appreciation of its currency can stimulate domestic inflation if the ________ of foreign currencies leads to ________ international reserves which ________ the monetary base.

Two reasons for an industrialized country to adopt an exchange-rate targeting regime are if the country ________ conduct successful monetary policy on its own,and if the country wants to ________ integration of the domestic economy with its neighbors.

Policymakers in a country with a balance of payments surplus may not want to see their country's currency appreciate because this would

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 ________.

Which of the following appears in the capital account part of the balance of payments?

The monetary policy strategy that results in the loss of an independent monetary policy is

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

Under the Bretton Woods system,the United States was designated as the

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

A balance of payments deficit is associated with a ________ of international reserves,while a balance of payments surplus is associated with a ________.

If the United States has a current account deficit with England of $1 million,and the Bank of England sells $1 million worth of pounds in the foreign exchange market,then England ________ $1 million of international reserves and its monetary base ________ by $1 million.

A country that dollarizes

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 fall in value,it may pursue ________ monetary policy to ________ the domestic interest rate,thereby strengthening its currency.

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

Because it provides some indication of what is happening to U.S.claims on foreign wealth and the demand for imports and exports,the ________ is closely followed by economists wanting information on the future movement of exchange rates.

Hong Kong chooses to have ________ and ________ and therefore,cannot have an independent monetary policy at the same time.