Question 1

Why would a country want its currency to float? Why might the country instead prefer it to be fixed in value with a nearby nation's currency?

Accepted Answer

Answers will vary.Students may define floating exchange rate and fixed exchange rate.They may discuss how floating exchange rates increase the flexibility of domestic monetary policy but increase uncertainty in its international interactions.They may discuss how fixed exchange rates increase stability at the domestic level and predictability in international interactions.The country's interests will help determine the type of exchange rate.

Question 2

Why does currency manipulation lead to conflictual interactions?

Accepted Answer

A) An artificially weak currency puts pressure on producers in other countries. 
B) Unstable currencies cause risks to everyone involved in international exchange. 
C) An artificially weak currency reduces the purchasing power of consumers in other countries. 
D) The sudden withdraw of investments from a country can lead to a currency crisis. 
A) An artificially weak currency puts pressure on producers in other countries. 
B) Unstable currencies cause risks to everyone involved in international exchange. 
C) An artificially weak currency reduces the purchasing power of consumers in other countries. 
D) The sudden withdraw of investments from a country can lead to a currency crisis. A

Question 3

Why can interactions in an international monetary regime be like a Prisoner's Dilemma?

Accepted Answer

A) Each government has an incentive to cheat by pegging its currency; the result is a world where every government wants to peg its currency to someone else. 
B) Each government has an incentive to cheat by devaluing its currency,and the result is that all governments become worse off because of competitive devaluations. 
C) Each government faces a choice between fixing its currency's exchange rate and letting the currency float freely. 
D) All governments have a clear incentive to create an international government to regulate monetary affairs even though this will make them captive to its rules. 
A) Each government has an incentive to cheat by pegging its currency; the result is a world where every government wants to peg its currency to someone else. 
B) Each government has an incentive to cheat by devaluing its currency,and the result is that all governments become worse off because of competitive devaluations. 
C) Each government faces a choice between fixing its currency's exchange rate and letting the currency float freely. 
D) All governments have a clear incentive to create an international government to regulate monetary affairs even though this will make them captive to its rules. B

Question 4

A national monetary system represents a public good because:

Accepted Answer

A) it is easy to exclude people from using a currency. 
B) it only has benefits for a minority of people who buy and sell goods internationally. 
C) there are no downsides to providing a national currency. 
D) people cannot be excluded from the monetary system or charged for using it. 
A) it is easy to exclude people from using a currency. 
B) it only has benefits for a minority of people who buy and sell goods internationally. 
C) there are no downsides to providing a national currency. 
D) people cannot be excluded from the monetary system or charged for using it.

Question 5

What domestic institution is usually responsible for determining interest rates in developed countries?

Accepted Answer

A) Monetary funds 
B) Adjustable pegs 
C) Regulatory banks 
D) Central banks 
A) Monetary funds 
B) Adjustable pegs 
C) Regulatory banks 
D) Central banks

Question 6

Which of the following countries is most likely to fix their currency to the U.S.dollar?

Accepted Answer

A) Canada 
B) Brazil 
C) Panama 
D) Germany 
A) Canada 
B) Brazil 
C) Panama 
D) Germany

Question 7

If the Argentine peso depreciates in relation to the dollar,it means that:

Accepted Answer

A) the Argentine peso has increased in value relative to the dollar. 
B) the Argentine peso has increased in value relative to all currencies but the dollar. 
C) the Argentine peso has decreased in value relative to the dollar. 
D) the Argentine peso has decreased in value relative to all currencies but the dollar. 
A) the Argentine peso has increased in value relative to the dollar. 
B) the Argentine peso has increased in value relative to all currencies but the dollar. 
C) the Argentine peso has decreased in value relative to the dollar. 
D) the Argentine peso has decreased in value relative to all currencies but the dollar.

Question 8

What are the root causes of the 2011 European monetary crisis? What lessons from previous crises are valuable in understanding this one?

Accepted Answer

Answers will vary.Students may discuss t

Question 9

What does it mean for a country to manipulate its currency? Should it be allowed to do this? Why or why not?

Accepted Answer

Answers will vary.Students may define an

Question 10

Which of the following is most like a commodity-backed paper standard?

Accepted Answer

A) The Bretton Woods System 
B) The British pound 
C) The euro 
D) The classical gold standard 
A) The Bretton Woods System 
B) The British pound 
C) The euro 
D) The classical gold standard

Question 11

Why do small countries that trade a lot generally prefer to fix their exchange rates?

Accepted Answer

A) Fixed exchange rates limit the inflation small countries are prone to. 
B) Fixed exchange rates provide more price stability and reduce risks for exports. 
C) Small countries do not have enough market size to adequately control their own flexible exchange rates when trade flows change. 
D) Small countries are unable to resist pressure from the United States to fix their currency to the dollar. 
A) Fixed exchange rates limit the inflation small countries are prone to. 
B) Fixed exchange rates provide more price stability and reduce risks for exports. 
C) Small countries do not have enough market size to adequately control their own flexible exchange rates when trade flows change. 
D) Small countries are unable to resist pressure from the United States to fix their currency to the dollar.

Question 12

Why would a country use another country's currency instead of its own?

Accepted Answer

A) Larger countries want to reduce the possibility of a global currency crisis. 
B) Smaller countries want to reduce the instability of their own currencies. 
C) The International Monetary Fund forces smaller countries to adopt the U.S.dollar when they have serious currency crises. 
D) Larger countries force smaller countries to adopt their currencies in order to facilitate trade. 
A) Larger countries want to reduce the possibility of a global currency crisis. 
B) Smaller countries want to reduce the instability of their own currencies. 
C) The International Monetary Fund forces smaller countries to adopt the U.S.dollar when they have serious currency crises. 
D) Larger countries force smaller countries to adopt their currencies in order to facilitate trade.

Question 13

Why do currency crises occur?

Accepted Answer

Answers will vary.Students may discuss t

Question 14

If a currency has increased in value relative to another currency it is said to have:

Accepted Answer

A) depreciated 
B) appreciated. 
C) been devalued. 
D) been realized. 
A) depreciated 
B) appreciated. 
C) been devalued. 
D) been realized.

Question 15

When and why do currency crises have international repercussions? What can be done to contain such crises?

Accepted Answer

Answers will vary.Students may discuss h

Question 16

If a country has adopted a fixed exchange rate,what tool(s)has it lost to battle economic recessions?

Accepted Answer

A) The ability to spend money 
B) The ability to place tariffs on imports 
C) The ability to lower or raise interest rates through a central bank 
D) The ability to use foreign currency 
A) The ability to spend money 
B) The ability to place tariffs on imports 
C) The ability to lower or raise interest rates through a central bank 
D) The ability to use foreign currency

Question 17

When and why do governments agree on a particular monetary system?

Accepted Answer

Answers will vary.Students may discuss t

Question 18

Why would a country change its interest rate?

Accepted Answer

A) Poorer countries peg their interest rates to the exchange rate. 
B) Countries try to lure foreign investors with higher interest rates. 
C) Lowering interest rates can reduce the country's trade deficit. 
D) Increasing interest rates can lead to an appreciation of the currency. 
A) Poorer countries peg their interest rates to the exchange rate. 
B) Countries try to lure foreign investors with higher interest rates. 
C) Lowering interest rates can reduce the country's trade deficit. 
D) Increasing interest rates can lead to an appreciation of the currency.

Question 19

Why do we need international monetary regimes?

Accepted Answer

A) Each country would rather address its own currency problems without outside interference. 
B) Countries usually want to create a single global currency. 
C) There is no international government to coordinate monetary relations. 
D) Governments have an interest in creating a global government. 
A) Each country would rather address its own currency problems without outside interference. 
B) Countries usually want to create a single global currency. 
C) There is no international government to coordinate monetary relations. 
D) Governments have an interest in creating a global government.

Question 20

What explains why governments choose particular currency arrangements?

Accepted Answer

Answers will vary.There are both costs a

Why would a country want its currency to float? Why might the country instead prefer it to be fixed in value with a nearby nation's currency?

Why does currency manipulation lead to conflictual interactions?

Why can interactions in an international monetary regime be like a Prisoner's Dilemma?

A national monetary system represents a public good because:

What domestic institution is usually responsible for determining interest rates in developed countries?

Which of the following countries is most likely to fix their currency to the U.S.dollar?

If the Argentine peso depreciates in relation to the dollar,it means that:

What are the root causes of the 2011 European monetary crisis? What lessons from previous crises are valuable in understanding this one?

What does it mean for a country to manipulate its currency? Should it be allowed to do this? Why or why not?

Which of the following is most like a commodity-backed paper standard?

Why do small countries that trade a lot generally prefer to fix their exchange rates?

Why would a country use another country's currency instead of its own?

Why do currency crises occur?

If a currency has increased in value relative to another currency it is said to have:

When and why do currency crises have international repercussions? What can be done to contain such crises?

If a country has adopted a fixed exchange rate,what tool(s)has it lost to battle economic recessions?

When and why do governments agree on a particular monetary system?

Why would a country change its interest rate?

Why do we need international monetary regimes?

What explains why governments choose particular currency arrangements?

What Shaped Our World

Understanding Interests, interactions, and Institutions

Why Are There Wars

Domestic Politics and War

International Institutions and War

Violence by Nonstate Actors: Civil War and Terrorism

International Trade

International Financial Relations

Development: Causes of the Wealth and Poverty of Nations

International Law and Norms

Human Rights

The Global Environment

The Future of International Politics

Introduction

Foundations, War, and Peace

International Political Economy, Transnational Politics, and Looking Ahead

Filters

Exam 9: International Monetary Relations

Why would a country want its currency to float? Why might the country instead prefer it to be fixed in value with a nearby nation's currency?

Why does currency manipulation lead to conflictual interactions?

Why can interactions in an international monetary regime be like a Prisoner's Dilemma?

A national monetary system represents a public good because:

What domestic institution is usually responsible for determining interest rates in developed countries?

Which of the following countries is most likely to fix their currency to the U.S.dollar?

If the Argentine peso depreciates in relation to the dollar,it means that:

What are the root causes of the 2011 European monetary crisis? What lessons from previous crises are valuable in understanding this one?

What does it mean for a country to manipulate its currency? Should it be allowed to do this? Why or why not?

Which of the following is most like a commodity-backed paper standard?

Why do small countries that trade a lot generally prefer to fix their exchange rates?

Why would a country use another country's currency instead of its own?

Why do currency crises occur?

If a currency has increased in value relative to another currency it is said to have:

When and why do currency crises have international repercussions? What can be done to contain such crises?

If a country has adopted a fixed exchange rate,what tool(s)has it lost to battle economic recessions?

When and why do governments agree on a particular monetary system?

Why would a country change its interest rate?

Why do we need international monetary regimes?

What explains why governments choose particular currency arrangements?

What Shaped Our World

Understanding Interests, interactions, and Institutions

Why Are There Wars

Domestic Politics and War

International Institutions and War

Violence by Nonstate Actors: Civil War and Terrorism

International Trade

International Financial Relations

Development: Causes of the Wealth and Poverty of Nations

International Law and Norms

Human Rights

The Global Environment

The Future of International Politics

Introduction

Foundations, War, and Peace

International Political Economy, Transnational Politics, and Looking Ahead

Filters