Question 1

Advocates of flexible exchange rates claim that under flexible exchange rates

Accepted Answer

A) the United States would now be able to set world monetary conditions all by itself. 
B) Germany would no longer be able to set world monetary conditions all by itself. 
C) the United Kingdom would no longer be able to set world monetary conditions all by itself. 
D) the United States would no longer be able to set world monetary conditions all by itself. 
E) Germany would now be able set world monetary conditions all by itself. 
A) the United States would now be able to set world monetary conditions all by itself. 
B) Germany would no longer be able to set world monetary conditions all by itself. 
C) the United Kingdom would no longer be able to set world monetary conditions all by itself. 
D) the United States would no longer be able to set world monetary conditions all by itself. 
E) Germany would now be able set world monetary conditions all by itself.

Question 2

The case of New Zealand,described in the text,concludes that a country's current account deficits are not sustainable if a country's

Accepted Answer

A) prospects for long term economic growth are above its global deficit growth. 
B) ability to sustain current account deficits is questionable. 
C) unproductive industrial sectors and its prospects for long run growth. 
D) labor productivity is below that of most other countries. 
E) exchange rate has fallen relative to other currencies. 
A) prospects for long term economic growth are above its global deficit growth. 
B) ability to sustain current account deficits is questionable. 
C) unproductive industrial sectors and its prospects for long run growth. 
D) labor productivity is below that of most other countries. 
E) exchange rate has fallen relative to other currencies.

Question 3

How did the international monetary system influence macroeconomic policy-making and performance during the post-World War II years during which exchange rates were fixed under the Bretton Woods agreement (1946-1973)?

Accepted Answer

In July 1944,representatives of 44 count

Question 4

Which of the following is NOT a result of a temporary fall in foreign demand on one country's exports under floating exchange rate?

Accepted Answer

A) The DD curve shifts to the left due to reduction of aggregate demand. 
B) The AA curve shifts downwards due to reduction of money supply. 
C) a fall in aggregate output 
D) depreciation in home country's currency 
E) a fall in the home interest rate 
A) The DD curve shifts to the left due to reduction of aggregate demand. 
B) The AA curve shifts downwards due to reduction of money supply. 
C) a fall in aggregate output 
D) depreciation in home country's currency 
E) a fall in the home interest rate

Question 5

The DD schedule shows

Accepted Answer

A) interest rate and output pairs for which aggregate demand equals aggregate output. 
B) exchange rate and output pairs for which aggregate demand equals aggregate output. 
C) exchange rate and output pairs for which aggregate supply equals aggregate output. 
D) interest rate and output pairs for which aggregate supply equals aggregate output. 
E) exchange rate and output pairs for which aggregate demand is greater than aggregate output. 
A) interest rate and output pairs for which aggregate demand equals aggregate output. 
B) exchange rate and output pairs for which aggregate demand equals aggregate output. 
C) exchange rate and output pairs for which aggregate supply equals aggregate output. 
D) interest rate and output pairs for which aggregate supply equals aggregate output. 
E) exchange rate and output pairs for which aggregate demand is greater than aggregate output.

Question 6

Advocates of flexible exchange rates claim that under flexible exchange rates

Accepted Answer

A) the United States would no longer have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
B) the United States would have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
C) the United Kingdom would not have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
D) Germany would not have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
E) China would have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
A) the United States would no longer have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
B) the United States would have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
C) the United Kingdom would not have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
D) Germany would not have the same opportunity as other countries to influence its exchange rate against foreign currencies. 
E) China would have the same opportunity as other countries to influence its exchange rate against foreign currencies.

Question 7

In order to bring about a real depreciation of the dollar,the U.S.can hope for

Accepted Answer

A) a rise in the U.S.price level. 
B) a fall in foreign price levels. 
C) a rise in the dollar's nominal value in terms of foreign currencies. 
D) a rise in foreign price levels or a fall in the dollar's nominal value in terms of foreign currencies. 
E) increased output and full employment. 
A) a rise in the U.S.price level. 
B) a fall in foreign price levels. 
C) a rise in the dollar's nominal value in terms of foreign currencies. 
D) a rise in foreign price levels or a fall in the dollar's nominal value in terms of foreign currencies. 
E) increased output and full employment.

Question 8

A country is said to be in balance of payments equilibrium,when the sum of its current and its

Accepted Answer

A) non-reserved capital accounts equals zero. 
B) reserved capital accounts equals zero. 
C) non-reserved capital accounts equals to the surplus in the capital account. 
D) non-reserved capital accounts equals to the deficit in the capital account. 
E) non-reserved capital accounts is higher than the total capital account balance. 
A) non-reserved capital accounts equals zero. 
B) reserved capital accounts equals zero. 
C) non-reserved capital accounts equals to the surplus in the capital account. 
D) non-reserved capital accounts equals to the deficit in the capital account. 
E) non-reserved capital accounts is higher than the total capital account balance.

Question 9

An attempt by a central bank to alter the money supply by buying or selling domestic assets

Accepted Answer

A) will leave both domestic money supply and foreign reserves unchanged. 
B) will cause an offsetting change in aggregate demand. 
C) will lead to a rise in domestic employment and output. 
D) will lead to a decrease in domestic employment and output. 
E) will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged. 
A) will leave both domestic money supply and foreign reserves unchanged. 
B) will cause an offsetting change in aggregate demand. 
C) will lead to a rise in domestic employment and output. 
D) will lead to a decrease in domestic employment and output. 
E) will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged.

Question 10

Under Bretton Woods,

Accepted Answer

A) any foreign country cannot devalue its currency against the dollar in conditions of "fundamental disequilibrium." 
B) any foreign country could devalue its currency against the dollar in conditions of "fundamental disequilibrium," but the system's rules did not give the United States the option of devaluing against foreign currencies. 
C) any foreign country could devalue its currency against the dollar in conditions of "fundamental disequilibrium," and the system's rules did give the United States the same option of devaluing against foreign currencies. 
D) the U.S.could devalue its currency against the foreign currencies in conditions of "fundamental disequilibrium." 
E) any foreign country can revalue its currency against the dollar in conditions of "fundamental disequilibrium." 
A) any foreign country cannot devalue its currency against the dollar in conditions of "fundamental disequilibrium." 
B) any foreign country could devalue its currency against the dollar in conditions of "fundamental disequilibrium," but the system's rules did not give the United States the option of devaluing against foreign currencies. 
C) any foreign country could devalue its currency against the dollar in conditions of "fundamental disequilibrium," and the system's rules did give the United States the same option of devaluing against foreign currencies. 
D) the U.S.could devalue its currency against the foreign currencies in conditions of "fundamental disequilibrium." 
E) any foreign country can revalue its currency against the dollar in conditions of "fundamental disequilibrium."

Question 11

Advocates of flexible exchange rates claim that under flexible exchange rates

Accepted Answer

A) no country would be forced to import only inflation from abroad. 
B) no country would be forced to import only deflation from abroad. 
C) no country would be forced to import inflation and deflation from abroad. 
D) flexible exchange rates are not able to halt importing inflation from abroad. 
E) flexible exchange rates are not able to halt importing deflation from abroad. 
A) no country would be forced to import only inflation from abroad. 
B) no country would be forced to import only deflation from abroad. 
C) no country would be forced to import inflation and deflation from abroad. 
D) flexible exchange rates are not able to halt importing inflation from abroad. 
E) flexible exchange rates are not able to halt importing deflation from abroad.

Question 12

The case of New Zealand,described in the text,draws what technical conclusion regarding the country's international debt position?

Accepted Answer

Fundamentally,the question is whether or

Question 13

Economic experience since 1973 indicate that,under floating exchange rates

Accepted Answer

A) large and persistent departures from external balance were not prevented. 
B) large and persistent departures from external balance were prevented. 
C) changes in exchange rates failed to act as automatic stabilizers. 
D) reduced monetary policy autonomy. 
E) monetary policy autonomy was protected. 
A) large and persistent departures from external balance were not prevented. 
B) large and persistent departures from external balance were prevented. 
C) changes in exchange rates failed to act as automatic stabilizers. 
D) reduced monetary policy autonomy. 
E) monetary policy autonomy was protected.

Question 14

Advocates of floating rate suggested it is favorable for economies for all of the following reasons EXCEPT

Accepted Answer

A) it discourages attack from foreign exchange speculators because of the fact that exchange rate adjustment is immediate. 
B) it helps stabilize the shock effect on unemployment in case of economic changes such as fall in export demand. 
C) it automatically matches the domestic inflation with ongoing foreign inflation. 
D) it gives every country the opportunity to guide its own monetary conditions at home. 
E) it brings the LR exchange rate to the level predicted by PPP without government policy decisions. 
A) it discourages attack from foreign exchange speculators because of the fact that exchange rate adjustment is immediate. 
B) it helps stabilize the shock effect on unemployment in case of economic changes such as fall in export demand. 
C) it automatically matches the domestic inflation with ongoing foreign inflation. 
D) it gives every country the opportunity to guide its own monetary conditions at home. 
E) it brings the LR exchange rate to the level predicted by PPP without government policy decisions.

Question 15

Economic experience since 1973 indicate that,under floating exchange rates,symmetry

Accepted Answer

A) was not attained. 
B) was attained almost immediately. 
C) was attained over time as central banks held more U.S.dollars as a reserve currency. 
D) has been difficult to measure and no consensus has emerged. 
E) has been attained in foreign countries,but not domestically. 
A) was not attained. 
B) was attained almost immediately. 
C) was attained over time as central banks held more U.S.dollars as a reserve currency. 
D) has been difficult to measure and no consensus has emerged. 
E) has been attained in foreign countries,but not domestically.

Question 16

Using an equation,explain why governments prefer to avoid excessive current account surpluses?

Accepted Answer

This follows from the national

Question 17

The Great Depression that started in 1929 was

Accepted Answer

A) confined only to the United States. 
B) confined only to the United States and Britain. 
C) confined only to the United States and Europe. 
D) a global phenomenon. 
E) confined only to the Americas. 
A) confined only to the United States. 
B) confined only to the United States and Britain. 
C) confined only to the United States and Europe. 
D) a global phenomenon. 
E) confined only to the Americas.

Question 18

Explain how a country with a current account deficit is a ripe candidate for currency devaluation.

Accepted Answer

If,for example,Great Britain had a curre

Question 19

-Refer to the above figure.Use the DD-AA model to examine and compare the response of an economy under fixed and floating exchange rate to a temporary fall in foreign demand for its exports.

Accepted Answer

The DD curve shifts to the left.When the

Question 20

A person holding dollar deposits during the devaluation of the dollar would

Accepted Answer

A) enjoy a monetary gain. 
B) see the foreign currency value of dollar assets increase by the amount of the exchange rate change. 
C) shift their wealth into domestic investments. 
D) suffer a monetary loss and see the foreign currency value of dollar assets decrease by the amount of the exchange rate change. 
E) see no change in their investments. 
A) enjoy a monetary gain. 
B) see the foreign currency value of dollar assets increase by the amount of the exchange rate change. 
C) shift their wealth into domestic investments. 
D) suffer a monetary loss and see the foreign currency value of dollar assets decrease by the amount of the exchange rate change. 
E) see no change in their investments.

Exam 19: International Monetary Systems: An Historical Overview

Advocates of flexible exchange rates claim that under flexible exchange rates

The case of New Zealand,described in the text,concludes that a country's current account deficits are not sustainable if a country's

How did the international monetary system influence macroeconomic policy-making and performance during the post-World War II years during which exchange rates were fixed under the Bretton Woods agreement (1946-1973)?

Which of the following is NOT a result of a temporary fall in foreign demand on one country's exports under floating exchange rate?

The DD schedule shows

Advocates of flexible exchange rates claim that under flexible exchange rates

In order to bring about a real depreciation of the dollar,the U.S.can hope for

A country is said to be in balance of payments equilibrium,when the sum of its current and its

An attempt by a central bank to alter the money supply by buying or selling domestic assets

Under Bretton Woods,

Advocates of flexible exchange rates claim that under flexible exchange rates

The case of New Zealand,described in the text,draws what technical conclusion regarding the country's international debt position?

Economic experience since 1973 indicate that,under floating exchange rates

Advocates of floating rate suggested it is favorable for economies for all of the following reasons EXCEPT

Economic experience since 1973 indicate that,under floating exchange rates,symmetry

Using an equation,explain why governments prefer to avoid excessive current account surpluses?

The Great Depression that started in 1929 was

Explain how a country with a current account deficit is a ripe candidate for currency devaluation.

-Refer to the above figure.Use the DD-AA model to examine and compare the response of an economy under fixed and floating exchange rate to a temporary fall in foreign demand for its exports.

A person holding dollar deposits during the devaluation of the dollar would

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money,Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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