Exam 18: The International Financial System

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 ________.

If the United States has a current account deficit with England of $1 million,and the Bank of England sells $1 million worth of pounds in the foreign exchange market,then England ________ $1 million of international reserves and its monetary base ________ by $1 million.

Under a fixed exchange rate regime,if the domestic currency is initially overvalued,that is,below par,the central bank must intervene to purchase the ________ currency by selling ________ assets.

Explain the 1992 crisis that led to the breakdown of the European Union's Exchange Rate Mechanism.What disadvantages of exchange-rate targeting were exhibited during this crisis?

Under the current managed float exchange rate regime,countries with balance of payments ________ frequently do not want to see their currencies ________ because it makes foreign goods more expensive for domestic consumers and can stimulate inflation.

Under the Bretton Woods system,the IMF could encourage ________ countries to pursue ________ monetary policies that would strengthen their currency or eliminate their balance of payment deficits.

Under an exchange-rate targeting rule for monetary policy,a crawling peg

Under a fixed exchange rate regime,if a country has an undervalued exchange rate,then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

Everything else held constant,if a central bank makes a sterilized purchase of foreign assets,then the domestic currency will ________.

Between May and July 1997,concerns about the large current account deficit in Thailand and the weakness in the Thai financial system caused speculators to suspect that Thailand might be forced to

The German central bank gained international reserves in the early 1970s because it sold ________ to prevent mark ________.

Under a fixed exchange rate regime,if a country's central bank runs out of international reserves,it cannot keep its currency from

An ECU was

The Bretton Woods system was one in which central banks

Under a fixed exchange rate regime,if the domestic currency is initially ________,that is,________ par,the central bank must intervene to purchase the domestic currency by selling foreign assets.

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

Under the Bretton Woods system,a country running a balance of payments surplus ________ international reserves,and had to implement ________ monetary policy to weaken its currency.

When a country forgoes its own currency and starts using another country's currency as its own,we say that this country has

Under the Bretton Woods system,when a country adopted an expansionary monetary policy,thereby causing a balance of payments ________,the country would eventually be forced to implement ________ monetary policy.

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