Exam 18: The International Financial System

The Policy Trilemma states that a country or a monetary union can't pursue the following three policies at the same time

Which of the following is NOT an advantage to exchange-rate targeting?

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

The account that shows international transactions involving financial transactions (stocks,bonds,bank loans,etc.)is called the

A current account surplus indicates that America is ________ its claims on foreign wealth,while a deficit indicates that this country is ________ its claims on foreign wealth.

A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal increase in its international reserves and the monetary base,everything else held constant.

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

Suppose that the Bank of Japan buys yen-denominated assets with U.S.dollar assets.Everything else held constant,this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S.monetary base.

Economists closely follow the current account balance because they believe it can provide information on the future movement of

When the domestic currency is initially overvalued in a fixed exchange rate regime,the central bank must intervene in the foreign exchange market to ________ the domestic currency,thereby allowing the money supply to ________.

An emerging market country that successfully used exchange-rate targeting to lower its inflation from above 100 percent in 1988 to below 10 percent in 1994 (before devaluation)was

The difference between merchandise exports and imports is called the ________ balance.

Explain the 1992 crisis that led to the breakdown of the European Union's Exchange Rate Mechanism.What disadvantages of exchange-rate targeting were exhibited during this crisis?

When the domestic currency is initially undervalued in a fixed exchange rate regime,the central bank must intervene in the foreign exchange market to ________ the domestic currency,thereby allowing the money supply to ________.

The fixed exchange rate regime established at a meeting in New Hampshire in 1944 has been known as the

An advantage to exchange-rate targeting is it helps keep inflation under control by tying the inflation rate for ________ traded goods to what is found in the ________ country.

A speculative attack involves massive sales of a currency or purchases of a currency that cause a sharp change in the exchange rate under a exchange rate system.

When the central bank allows the purchase or sale of domestic currency to have an effect on the monetary base,it is called

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

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.