Exam 18: The International Financial System

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

The revenue a government gains from issuing money is

Assume that a fixed exchange rate is overvalued. Describe the situation of a speculative crisis against this currency.What can the central bank do to defend the currency? Why might the alternative of devaluation be preferable?

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 ________.

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

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

The account that shows international transactions involving currently produced goods and services is called the

A country that dollarizes

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

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.

Under the current managed float exchange rate regime,countries with ________ in their balance of payments frequently do not want to see their currencies ________ because it makes their goods more expensive abroad and foreign goods cheaper in their countries.

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

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

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

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

A weakness of the Bretton Woods system was that the ________ had no way to force surplus countries to either revalue their exchange rates upwards or pursue more expansionary policies.

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

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

Under the Bretton Woods system,a country running a balance of payments deficit ________ international reserves,and had to implement ________ monetary policy to strengthen its currency.

Under a fixed exchange rate regime,a central bank that does not want to acquire international reserves to keep its currency from ________ will decide to ________ its currency.