Exam 20: The International Financial System

Under a fixed exchange rate regime,if a country has an ________ exchange rate,then its central bank's attempt to keep its currency from depreciating 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.

Countries with surpluses in their balance of payments frequently do not want to see their currencies ________ because it makes their goods ________ expensive abroad.

Under the Bretton Woods system,the IMF could encourage deficit countries to pursue contractionary monetary policies that would ________ their currency or eliminate their balance of payment ________.

Which of the following is true?

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

Two reasons for an industrialized country to adopt an exchange-rate targeting regime are if the country ________ conduct successful monetary policy on its own,and if the country wants to ________ integration of the domestic economy with its neighbors.

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

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.

Explain what is the sterilized foreign exchange intervention.Give an example.

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 ________.

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

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

Under the Bretton Woods system,if IMF loans were insufficient to prevent ________ of a currency,then the country was allowed to devalue its currency by setting a new,________ exchange rate.

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

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

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

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.

Between May and July 1997,concerns about the large current account deficit in Thailand and the weakness in the Thai financial system caused speculators to suspect that Thailand might be forced to ________.

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