Exam 19: The International Financial System

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

Which of the following is not a disadvantage of exchange-rate targeting?

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.

Since the abandonment of the Bretton Woods system, balance of payments considerations have become ________ important, and exchange rate considerations ________ important in the conduct of monetary policy.

Which of the following is true?

The World Bank is an international organization that ________.

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

A country that dollarizes ________.

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.

The account that shows international transactions involving currently produced goods and services is called the ________.

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.

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

Exchange-rate targeting allows a central bank to ________, thus this will ________ the probability of policy developing a time-inconsistency problem.

Assume that a fixed exchange rate is overvalued. Describe the situation of a speculative crisis against this currency. What can the central bank do to defend the currency? Why might the alternative of devaluation be preferable?

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.

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.

When gold production was low in the 1870s and 1880s, the money supply grew ________ causing ________.

The monetary policy strategy that does not allow the policy to focus on domestic considerations is ________.

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

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.