Exam 18: The International Financial System

Under the Exchange Rate Mechanism of the European Monetary System,when the German mark depreciated below its lower limit against the British pound,the Bank of England was required to buy ________ and sell ________,thereby ________ international reserves.

Under a fixed exchange rate regime,if a country's central bank runs out of international reserves,it cannot keep its currency from

Under a fixed exchange rate regime,if the domestic currency is initially ________,that is,________ par,the central bank must intervene to purchase the domestic currency by selling foreign assets.

A capital ________ can promote financial instability in an emerging-market country because it can lead to a lending boom and excessive risk-taking on the part of banks,which helps trigger a ________.

The seignorage for a government is greater for ________ than for ________.

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

China chooses to have ________ and ________ and therefore,cannot have free capital mobility at the same time.

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

The monetary policy strategy that directly ties down the price of internationally traded goods is

The monetary policy strategy that provides an automatic rule for the conduct of monetary policy is

When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency,then the country is said to have

Because sterilized interventions mean offsetting open market operations,there is no impact on the monetary base and the money supply,and therefore a sterilized intervention

Under a fixed exchange rate regime,if a central bank must intervene to purchase the ________ currency by selling ________ assets,then,like an open market sale,this action reduces the monetary base and the money supply,causing the interest rate on domestic assets to rise.

Of the following,the one that appears in the current account of the balance of payments is

Under the current managed float exchange rate regime,countries with balance of payments deficits frequently do not want to see their currencies depreciate because it makes ________ goods more expensive for ________ consumers and can stimulate inflation.

A capital ________ can promote financial instability in an emerging-market country because it is what forces a country to ________ its currency.

Suppose that the Bank of Japan buys U.S.dollar assets with yen-denominated 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.