Exam 20: The International Financial System

Under the Exchange Rate Mechanism of the European Monetary System,when the British pound depreciated below its lower limit against the German mark,the German central bank 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 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 German central bank gained international reserves in the early 1970s because it sold ________ to prevent mark ________.

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

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.

Under the Bretton Woods system,when a country adopted an expansionary monetary policy,thereby causing a balance of payments ________,the country would eventually be forced to implement ________ monetary policy.

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

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

An advantage of an international lender of last resort is its ability to prevent ________,in which a successful speculative attack on one currency leads to attacks on others; its disadvantage is the problem of ________ if creditors expect to be protected if a crisis occurs.

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 ________.

Which of the following is not a disadvantage of controls on capital outflows?

In the early 1970s,the United States ran large balance of payments ________,causing an ________ dollar and an ________ German mark.

Canada's 2010 current account was a ________ meaning that ________ exceeded ________.

A central bank's attempt to prevent an appreciation of its currency can stimulate domestic inflation if the ________ of foreign currencies leads to ________ international reserves which ________ the monetary base.

Because central banks have not been willing to give up their option of intervening in the foreign exchange market,the current international financial system can best be described as a ________.

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

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

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 ________.

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