Exam 3: The International Monetary System

Members of the International Monetary Fund may settle transactions among themselves by transferring Special Drawing Rights (SDRs).

The authors discuss the concept of the "Impossible Trinity" or the inability to achieve simultaneously the goals of exchange rate stability, full financial integration, and monetary independence. If a country chooses to have a pure float exchange rate regime, which two of the three goals is a country most able to achieve?

A currency that has decreased in foreign exchange value relative to a floating rate currency has ________.

Another name for the International Bank for Reconstruction and Development is

The increase in value of a currency pegged to gold or another currency is known as ________.

Which of the following is a way in which the euro affects markets?

Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange regime was

Even though the Euro currency has been designed and printed, it is still not available for general use by the public, except for tourists, in the European Union.

According to the authors, what is the single most important mandate of the European Central Bank?

The Euro currency is fixed against other currencies on the international currency exchange markets, but allows member country currencies to float against each other.

A small economy country whose GDP is heavily dependent on trade with the United States could use a (an) ________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.

Generally, Eurocurrency loans are based on the London Interbank Offered Rate (LIBOR) and have a lower offering rate because

You check the Yahoo.com currency web page and find that the Japanese yen is trading at a rate of 113 yen per dollar. This rate of exchange is typically referred to as the ________.

A currency is considered hard if

The price of one country's currency in units of another currency or commodity is the ________.

If exchange rates were fixed, investors and traders would be relatively certain about the current and near future exchange value of each currency.

A United States firm had chosen to deposit money in a British bank and have it denominated in U.S. dollars. This is an example of a (an) ________ deposit.

Ignoring transaction costs and based solely on the change in currency exchange rates, a speculator who sold short a two-year contract for the euro (receiving dollars) in January 2006 would have realized a profit upon the exercise of the contract in January 2008.

World War I caused the suspension of the gold standard for fixed international exchange rates because the war

You have been hired as a consultant to the central bank for a country that has for many years suffered from repeated currency crises and depends heavily on the U.S. financial and product markets. Which of the following policies would have the greatest effectiveness for reducing currency volatility of the client country with the United States?