Exam 18: The International Financial System

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

The net amount of international reserves that move between governments to finance international transactions is called the ________ balance.

In the 1990s this agency has acted like an international lender of last resort to cope with financial instability.

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.

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

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

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

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.

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 ________.

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 German mark could be exchanged for 1/100th of an ounce of gold,an exchange rate of ________ marks to the dollar would stimulate a flow of gold from the United States to Germany.

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.

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.

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

The East Asia currency crisis in 1997 started in

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.

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

When gold production was low in the 1870s and 1880s,the money supply grew ________ causing ________.

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 Bretton Woods system broke down in the early 1970s for all but one of the following reasons:

Under a fixed exchange rate system,countries that ran large,persistent balance of payments deficits would ________ international reserves,thereby pressuring them into ________ their exchange rate.