Exam 20: 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 German central bank was required to buy ________ and sell ________,thereby ________ international reserves.

A country that dollarizes ________.

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

The World Bank is an international organization that ________.

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

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.

A balance of payments ________ is associated with a loss of international reserves,while a balance of payments ________ is associated with a gain.

To maintain fixed exchange rates when countries had balance of payments deficits and were losing international reserves,the ________ would loan ________ countries international reserves contributed by other members.

Because the United States was the reserve-currency country under the Bretton Woods system,it could run large balance of payments ________ without ________ significant amounts of international reserves.

If a central bank does not want to see its currency ________ in value,it may pursue contractionary monetary policy to raise the domestic interest rate,thereby ________ its currency.

If the current account balance shows a surplus,and the capital account also shows a surplus,then the official reserve transactions balance ________.

In response to the overvalued dollar in the early 1970s,the German Bundesbank bought ________ and sold ________ to keep the exchange rate fixed,gaining international reserves.

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

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

Which of the following does not appear in the current account part of the balance of payments?

A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal increase in its international reserves and the monetary base,everything else held constant.

Under exchange-rate targeting,the central bank in the targeting country ________ lose the ability to pursue its own independent monetary policy and any shocks to the anchor country is ________ transmitted to the targeting country.

The difference between merchandise exports and imports is called the ________ balance.

The fixed exchange rate regime established at a meeting in New Hampshire in 1944 has been known as the ________.

Under a gold standard in which one dollar could be turned in to the Bank of Canada 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 Canada to Germany.