Question 1

Which one of the following statements is TRUE?

Accepted Answer

A)  Countries where investment is relatively productive should be net importers of current output. 
B)  Countries where investment is relatively unproductive should be net importers of current output. 
C)  Countries where investment is relatively productive should be net exporters of current output. 
D)  Countries where investment is relatively productive should not export or import current output. 
E)  Countries where investment is relatively unproductive should invest at home. 
A)  Countries where investment is relatively productive should be net importers of current output. 
B)  Countries where investment is relatively unproductive should be net importers of current output. 
C)  Countries where investment is relatively productive should be net exporters of current output. 
D)  Countries where investment is relatively productive should not export or import current output. 
E)  Countries where investment is relatively unproductive should invest at home.

Question 2

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

Accepted Answer

A)  Only two of the three aspects of internal and external balance can be accommodated simultaneously. 
B)  Only three of the four aspects of internal and external balance can be accommodated simultaneously. 
C)  Only one of the three aspects of internal and external balance can be accommodated simultaneously. 
D)  Only two of the four aspects of internal and external balance can be accommodated simultaneously. 
E)  Only one of the four aspects of internal and external balance can be accommodated simultaneously. 
A)  Only two of the three aspects of internal and external balance can be accommodated simultaneously. 
B)  Only three of the four aspects of internal and external balance can be accommodated simultaneously. 
C)  Only one of the three aspects of internal and external balance can be accommodated simultaneously. 
D)  Only two of the four aspects of internal and external balance can be accommodated simultaneously. 
E)  Only one of the four aspects of internal and external balance can be accommodated simultaneously.

Question 3

Under the Gold standard, a country is said to be in balance of payments equilibrium when the current account balance is

Accepted Answer

A)  financed entirely by international lending without reserve movements. 
B)  financed by international lending and with reserve movements. 
C)  equal to zero. 
D)  financed entirely by international lending and past gold reserves. 
E)  financed entirely by gold reserves. 
A)  financed entirely by international lending without reserve movements. 
B)  financed by international lending and with reserve movements. 
C)  equal to zero. 
D)  financed entirely by international lending and past gold reserves. 
E)  financed entirely by gold reserves.

Question 4

"A monetary policy is not a policy tool under fixed exchange rates." Discuss.

Accepted Answer

True, under fixed exchange rat

Question 5

Advocates of flexible exchange rates claim that under flexible exchange rates

Accepted Answer

A)  no country would be forced to import only inflation from abroad. 
B)  no country would be forced to import only deflation from abroad. 
C)  no country would be forced to import inflation and deflation from abroad. 
D)  flexible exchange rates are not able to halt importing inflation from abroad. 
E)  flexible exchange rates are not able to halt importing deflation from abroad. 
A)  no country would be forced to import only inflation from abroad. 
B)  no country would be forced to import only deflation from abroad. 
C)  no country would be forced to import inflation and deflation from abroad. 
D)  flexible exchange rates are not able to halt importing inflation from abroad. 
E)  flexible exchange rates are not able to halt importing deflation from abroad.

Question 6

Under fixed exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is

Accepted Answer

A)  the currency appreciates, and output falls. 
B)  the currency depreciates, and output falls. 
C)  the currency remains the same, and output decreases. 
D)  the currency depreciates, and output remains constant. 
E)  the currency appreciates, and output remains the same. 
A)  the currency appreciates, and output falls. 
B)  the currency depreciates, and output falls. 
C)  the currency remains the same, and output decreases. 
D)  the currency depreciates, and output remains constant. 
E)  the currency appreciates, and output remains the same.

Question 7

-Use the DD-AA model to compare the domestic economic response under flexible and fixed exchange rate regimes to a temporary rise in export demand from foreign countries.

Accepted Answer

Under floating rate: The DD curve shifts

Question 8

What explains the nearly universal scope of the Great Depression?

Accepted Answer

The international gold standar

Question 9

Why do governments prefer to avoid current account deficits that are too large?

Accepted Answer

A current account deficit may pose no pr

Question 10

Advocates of flexible exchange rates claim that under flexible exchange rates, if the central bank faced unemployment

Accepted Answer

A)  and thus wished to decrease its money supply, there would no longer be any legal barrier to the currency depreciation this would cause. 
B)  and thus wished to expand its money supply, there would no longer be any legal barrier to the currency depreciation this would cause. 
C)  and wished to expand its money supply, there would no longer be any legal barrier to the currency appreciation this would cause. 
D)  and wished to decrease its money supply, there now would be a legal barrier to the currency depreciation this would cause. 
E)  and wished to increase output, there would no longer be a legal barrier to the currency appreciation this would cause. 
A)  and thus wished to decrease its money supply, there would no longer be any legal barrier to the currency depreciation this would cause. 
B)  and thus wished to expand its money supply, there would no longer be any legal barrier to the currency depreciation this would cause. 
C)  and wished to expand its money supply, there would no longer be any legal barrier to the currency appreciation this would cause. 
D)  and wished to decrease its money supply, there now would be a legal barrier to the currency depreciation this would cause. 
E)  and wished to increase output, there would no longer be a legal barrier to the currency appreciation this would cause.

Question 11

Maintaining a fixed exchange rate over the long run is today

Accepted Answer

A)  virtually impossible. 
B)  more vulnerable to speculative attacks than in the past. 
C)  preferable. 
D)  possible only in special cases such as maintaining strict capital controls. 
E)  aided by technology which allows instant movement of money between financial markets in different countries. 
A)  virtually impossible. 
B)  more vulnerable to speculative attacks than in the past. 
C)  preferable. 
D)  possible only in special cases such as maintaining strict capital controls. 
E)  aided by technology which allows instant movement of money between financial markets in different countries.

Question 12

The Plaza Accord of 1985 announces that the

Accepted Answer

A)  G-5 countries will intervene in the foreign exchange market to bring about a dollar appreciation. 
B)  G-7 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
C)  G-5 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
D)  G-7 countries will intervene in the foreign exchange market to bring about a DM depreciation. 
E)  G-5 countries will not intervene in the foreign exchange market unless the dollar needs to appreciate. 
A)  G-5 countries will intervene in the foreign exchange market to bring about a dollar appreciation. 
B)  G-7 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
C)  G-5 countries will intervene in the foreign exchange market to bring about a dollar depreciation. 
D)  G-7 countries will intervene in the foreign exchange market to bring about a DM depreciation. 
E)  G-5 countries will not intervene in the foreign exchange market unless the dollar needs to appreciate.

Question 13

A country seeking to maintain internal balance would be concerned

Accepted Answer

A)  only with attaining low levels of unemployment. 
B)  primarily with ensuring that saving is weighted more towards domestic investment than the current account. 
C)  with large fluctuations in output or prices. 
D)  with maintaining an adequate stock of gold reserves. 
E)  with stabilizing employment levels globally. 
A)  only with attaining low levels of unemployment. 
B)  primarily with ensuring that saving is weighted more towards domestic investment than the current account. 
C)  with large fluctuations in output or prices. 
D)  with maintaining an adequate stock of gold reserves. 
E)  with stabilizing employment levels globally.

Question 14

The confidence problem of the Bretton Woods systems articulated by Robert Triffin refers to

Accepted Answer

A)  the unwillingness of central banks to accumulate currency for fear of not being able to convert it to gold in case a run on the banks occurs. 
B)  consumer fear of stock market instability. 
C)  producer fear of rising wages. 
D)  the lack of convertibility of gold into silver. 
E)  low consumer spending because of balance of payment crises. 
A)  the unwillingness of central banks to accumulate currency for fear of not being able to convert it to gold in case a run on the banks occurs. 
B)  consumer fear of stock market instability. 
C)  producer fear of rising wages. 
D)  the lack of convertibility of gold into silver. 
E)  low consumer spending because of balance of payment crises.

Question 15

Due to macroeconomics interdependence between large countries, the effect of a permanent monetary policy expansion by Home is as follows: Home output

Accepted Answer

A)  rises, Home's currency depreciates, and Foreign output may rise or fall. 
B)  falls, Home's currency depreciates, and Foreign output may rise or fall. 
C)  rises, Home's currency appreciates, and Foreign output may rise or fall. 
D)  rises, Home's currency depreciates, and Foreign output rises. 
E)  falls, Home's currency appreciates, and Foreign output may rise or fall. 
A)  rises, Home's currency depreciates, and Foreign output may rise or fall. 
B)  falls, Home's currency depreciates, and Foreign output may rise or fall. 
C)  rises, Home's currency appreciates, and Foreign output may rise or fall. 
D)  rises, Home's currency depreciates, and Foreign output rises. 
E)  falls, Home's currency appreciates, and Foreign output may rise or fall.

Question 16

Which one of the following statements is TRUE?

Accepted Answer

A)  Countries with strong investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
B)  Countries with weak investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
C)  Countries with weak investment opportunities should invest more at home. 
D)  Countries with weak investment opportunities should invest little abroad. 
E)  Countries with weak investment opportunities should invest little abroad and channel their savings into more productive investment activity domestically. 
A)  Countries with strong investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
B)  Countries with weak investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. 
C)  Countries with weak investment opportunities should invest more at home. 
D)  Countries with weak investment opportunities should invest little abroad. 
E)  Countries with weak investment opportunities should invest little abroad and channel their savings into more productive investment activity domestically.

Question 17

Using an equation, explain why governments prefer to avoid excessive current account surpluses?

Accepted Answer

This follows from the national

Question 18

The price-specie-flow mechanism

Accepted Answer

A)  is an automatic mechanism for assuring external balance under floating exchange rates. 
B)  is an automatic mechanism for assuring external balance under the gold standard. 
C)  is an automatic mechanism for assuring internal balance under floating exchange rates. 
D)  is an automatic mechanism for assuring internal balance under the gold standard. 
E)  is an automatic mechanism for assuring internal balance under mercantilism. 
A)  is an automatic mechanism for assuring external balance under floating exchange rates. 
B)  is an automatic mechanism for assuring external balance under the gold standard. 
C)  is an automatic mechanism for assuring internal balance under floating exchange rates. 
D)  is an automatic mechanism for assuring internal balance under the gold standard. 
E)  is an automatic mechanism for assuring internal balance under mercantilism.

Question 19

Until the United States Civil War, The Unites States had a

Accepted Answer

A)  gold-based monetary standard. 
B)  silver-based monetary standard. 
C)  bimetallic monetary standard consisting of silver and gold. 
D)  bimetallic monetary standard consisting of copper and silver. 
E)  bimetallic monetary standard consisting of copper and gold. 
A)  gold-based monetary standard. 
B)  silver-based monetary standard. 
C)  bimetallic monetary standard consisting of silver and gold. 
D)  bimetallic monetary standard consisting of copper and silver. 
E)  bimetallic monetary standard consisting of copper and gold.

Question 20

The Great Depression that started in 1929 was

Accepted Answer

A)  confined only to the United States. 
B)  confined only to the United States and Britain. 
C)  confined only to the United States and Europe. 
D)  a global phenomenon. 
E)  confined only to the Americas. 
A)  confined only to the United States. 
B)  confined only to the United States and Britain. 
C)  confined only to the United States and Europe. 
D)  a global phenomenon. 
E)  confined only to the Americas.

Exam 19: International Monetary Systems: an Historical Overview

Which one of the following statements is TRUE?

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

Under the Gold standard, a country is said to be in balance of payments equilibrium when the current account balance is

"A monetary policy is not a policy tool under fixed exchange rates." Discuss.

Advocates of flexible exchange rates claim that under flexible exchange rates

Under fixed exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is

-Use the DD-AA model to compare the domestic economic response under flexible and fixed exchange rate regimes to a temporary rise in export demand from foreign countries.

What explains the nearly universal scope of the Great Depression?

Why do governments prefer to avoid current account deficits that are too large?

Advocates of flexible exchange rates claim that under flexible exchange rates, if the central bank faced unemployment

Maintaining a fixed exchange rate over the long run is today

The Plaza Accord of 1985 announces that the

A country seeking to maintain internal balance would be concerned

The confidence problem of the Bretton Woods systems articulated by Robert Triffin refers to

Due to macroeconomics interdependence between large countries, the effect of a permanent monetary policy expansion by Home is as follows: Home output

Which one of the following statements is TRUE?

Using an equation, explain why governments prefer to avoid excessive current account surpluses?

The price-specie-flow mechanism

Until the United States Civil War, The Unites States had a

The Great Depression that started in 1929 was

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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