Question 1

Under a gold standard

Accepted Answer

A) there cannot be a balance of payments deficit. 
B) there cannot be a balance of payments surplus. 
C) balance of payments imbalances should be quickly corrected by gold flows. 
D) countries must sterilize all gold transactions. 
A) there cannot be a balance of payments deficit. 
B) there cannot be a balance of payments surplus. 
C) balance of payments imbalances should be quickly corrected by gold flows. 
D) countries must sterilize all gold transactions. C

Question 2

Sterilization refers to actions taken by central banks

Accepted Answer

A) to neutralize the effects of balance of payments disequilibria on the money supply. 
B) to increase gold inflows when there is a balance of payments surplus. 
C) to decrease gold outflows when there is a balance of payments surplus. 
D) to cause the exchange rate to appreciate or depreciate. 
A) to neutralize the effects of balance of payments disequilibria on the money supply. 
B) to increase gold inflows when there is a balance of payments surplus. 
C) to decrease gold outflows when there is a balance of payments surplus. 
D) to cause the exchange rate to appreciate or depreciate. A

Question 3

Explain why the establishment of a freely-flexible exchange rate system is unlikely today.

Accepted Answer

Under a freely-flexible exchange rate system,exchange rates are determined exclusively by the forces of demand and supply without any foreign exchange market intervention on the part of monetary authorities.Under such a self-adjusting system,the need for international reserves would virtually disappear and monetary authorities could devote most of their energies to achieve internal balance.At least,this is how a freely-flexible exchange rate system was supposed to operate.In reality,huge international capital flows rob the nation of most of its monetary independence.Huge international capital flows are also likely to lead to excessive volatility of exchange rate.Exchange rates could also become grossly misaligned for long periods of time.This would seriously distort the pattern of world trade and specialization.As a result,it is rather unlikely that the present managed exchange rate system will evolve in a truly freely flexible exchange rate system.Indeed,it is more likely that more restrictions will be imposed in the future on exchange rate fluctuations.

Question 4

Which of the following is false with regard to the present international monetary system?

Accepted Answer

A) Special Drawing Rights are the primary reserve asset 
B) Monetary authorities intervene in foreign exchange markets to smooth out excessive short-run fluctuations in exchange rates 
C) It was forced on the world by the collapse of the Bretton Woods System 
D) It was formally recognized in the Jamaica Accords 
A) Special Drawing Rights are the primary reserve asset 
B) Monetary authorities intervene in foreign exchange markets to smooth out excessive short-run fluctuations in exchange rates 
C) It was forced on the world by the collapse of the Bretton Woods System 
D) It was formally recognized in the Jamaica Accords

Question 5

The present international monetary system is a:

Accepted Answer

A) gold standard 
B) flexible exchange rate system 
C) managed exchange rate system 
D) a target zone system 
A) gold standard 
B) flexible exchange rate system 
C) managed exchange rate system 
D) a target zone system

Question 6

Today,roughly how many members of the IMF opt for some form of exchange rate flexibility?

Accepted Answer

A) 10% 
B) 25% 
C) 50% 
D) 90% 
A) 10% 
B) 25% 
C) 50% 
D) 90%

Question 7

The global financial crisis of 2008-2009 began as a

Accepted Answer

A) subprime mortgage crisis in the U.S. 
B) exchange rate crisis in Japan 
C) corruption crisis in Russia 
D) banking crisis in China 
A) subprime mortgage crisis in the U.S. 
B) exchange rate crisis in Japan 
C) corruption crisis in Russia 
D) banking crisis in China

Question 8

Identify the major trade imbalances in the world today,and explain why they are not sustainable and what must happen in the long run.

Accepted Answer

The U.S.and the U.K.: persistent deficit

Question 9

In the wake of the 2008-2009 global financial crisis the following is a potential economic problem facing the world today

Accepted Answer

A) rising trade protection 
B) a large U.S.balance of payments deficit 
C) deep poverty in many developing nations 
D) all of the above 
A) rising trade protection 
B) a large U.S.balance of payments deficit 
C) deep poverty in many developing nations 
D) all of the above

Question 10

The International Monetary Fund was initially established to manage

Accepted Answer

A) the Gold Standard 
B) the Gold-Exchange Standard 
C) the euro-dollar exchange rate 
D) the Dollarization initiative 
A) the Gold Standard 
B) the Gold-Exchange Standard 
C) the euro-dollar exchange rate 
D) the Dollarization initiative

Question 11

Which of the following statements is false with regard to 11 countries of the European Monetary Union?

Accepted Answer

A) They have adopted a single currency 
B) They have established a single central bank 
C) Conduct a common fiscal policy 
D) Conduct a single monetary policy 
A) They have adopted a single currency 
B) They have established a single central bank 
C) Conduct a common fiscal policy 
D) Conduct a single monetary policy

Question 12

The immediate cause for the collapse of the Bretton Woods System was:

Accepted Answer

A) the expectation that the United States would soon be forced to devalue the dollar 
B) the massive flight of liquid capital from the United States 
C) the attempt by three small European central banks to convert part of their dollar holdings into gold at the Fed 
D) all of the above 
A) the expectation that the United States would soon be forced to devalue the dollar 
B) the massive flight of liquid capital from the United States 
C) the attempt by three small European central banks to convert part of their dollar holdings into gold at the Fed 
D) all of the above

Question 13

What are the most serious economic problems facing the world today?

Accepted Answer

The danger of rising protectionism in ad

Question 14

What type of international monetary system(s)operated before WWI,between WWI and WWII,and shortly after WWII?

Accepted Answer

The world operated under the gold standa

Question 15

During the 1960s the U.S.attempted to correct its balance of payments deficits by:

Accepted Answer

A) ad hoc measures 
B) devaluing the dollar 
C) deflating the economy 
D) restricting imports 
A) ad hoc measures 
B) devaluing the dollar 
C) deflating the economy 
D) restricting imports

Question 16

On which of the following principles was the Bretton Woods System based on?

Accepted Answer

A) Fixed exchange rates 
B) Currency convertibility 
C) Free trade 
D) All of the above 
A) Fixed exchange rates 
B) Currency convertibility 
C) Free trade 
D) All of the above

Question 17

Which of the following was a primary cause of the U.S.balance of payments deficits during the late 1960s?

Accepted Answer

A) Capital outflows 
B) Domestic inflation 
C) Increased foreign competition 
D) All of the above 
A) Capital outflows 
B) Domestic inflation 
C) Increased foreign competition 
D) All of the above

Question 18

The Bretton Woods System:

Accepted Answer

A) allowed nation to change their par values when facing fundamental disequilibrium 
B) allowed nations to change their par values when facing a temporary disequilibrium 
C) did not allow nations to change their par exchange rates under any circumstance 
D) allowed only deficit nations to change their par values,but not surplus nations 
A) allowed nation to change their par values when facing fundamental disequilibrium 
B) allowed nations to change their par values when facing a temporary disequilibrium 
C) did not allow nations to change their par exchange rates under any circumstance 
D) allowed only deficit nations to change their par values,but not surplus nations

Question 19

Which of the following did not represent an evolution of the Bretton Woods System?

Accepted Answer

A) General Arrangements to Borrow 
B) managed floating 
C) standby arrangements 
D) Special Drawing Rights 
A) General Arrangements to Borrow 
B) managed floating 
C) standby arrangements 
D) Special Drawing Rights

Question 20

The interwar period was characterized by:

Accepted Answer

A) the operation of the gold standard 
B) chaotic conditions in international trade and finance 
C) free trade 
D) stabilizing international capital flows 
A) the operation of the gold standard 
B) chaotic conditions in international trade and finance 
C) free trade 
D) stabilizing international capital flows

Exam 21: The International Monetary System: Past,present,and Future

Under a gold standard

Sterilization refers to actions taken by central banks

Explain why the establishment of a freely-flexible exchange rate system is unlikely today.

Which of the following is false with regard to the present international monetary system?

The present international monetary system is a:

Today,roughly how many members of the IMF opt for some form of exchange rate flexibility?

The global financial crisis of 2008-2009 began as a

Identify the major trade imbalances in the world today,and explain why they are not sustainable and what must happen in the long run.

In the wake of the 2008-2009 global financial crisis the following is a potential economic problem facing the world today

The International Monetary Fund was initially established to manage

Which of the following statements is false with regard to 11 countries of the European Monetary Union?

The immediate cause for the collapse of the Bretton Woods System was:

What are the most serious economic problems facing the world today?

What type of international monetary system(s)operated before WWI,between WWI and WWII,and shortly after WWII?

During the 1960s the U.S.attempted to correct its balance of payments deficits by:

On which of the following principles was the Bretton Woods System based on?

Which of the following was a primary cause of the U.S.balance of payments deficits during the late 1960s?

The Bretton Woods System:

Which of the following did not represent an evolution of the Bretton Woods System?

The interwar period was characterized by:

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

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