Exam 18: The International Financial System

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

An international lender of last resort creates a serious ________ problem because depositors and other creditors of banking institutions expect that they will be protected if a crisis occurs.

Suppose that the Bank of Japan buys U.S.dollar assets with yen-denominated assets.Everything else held constant,this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S.monetary base.

A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal increase in its international reserves and the monetary base,everything else held constant.

A balance of payments ________ is associated with a loss of international reserves,while a balance of payments ________ is associated with a gain.

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.

Critics of the IMF contend that its lending in the ________ crisis,which was used to bail out foreign lenders,set the stage for the ________ crisis because these lenders expected to be bailed out if things went wrong and thus provided funds that were used to fuel excessive risk taking.

Under a fixed exchange rate system,countries that ran large,persistent balance of payments deficits would ________ international reserves,thereby pressuring them into ________ their exchange rate.

An emerging market country that successfully used exchange-rate targeting to lower its inflation from above 100 percent in 1988 to below 10 percent in 1994 (before devaluation)was

The seignorage for a government is greater for ________ than for ________.

Explain and demonstrate graphically the situation of an overvalued exchange rate in a fixed exchange rate system.What alternative policies are available to eliminate the overvaluation of the exchange rate?

Of the following,the one that appears in the current account of the balance of payments is

The account that shows international transactions involving financial transactions (stocks,bonds,bank loans,etc.)is called the

An advantage of an international lender of last resort is its ability to prevent ________,in which a successful speculative attack on one currency leads to attacks on others; its disadvantage is the problem of ________ if creditors expect to be protected if a crisis occurs.

Under the current managed float exchange rate regime; countries with surpluses in their balance of payments frequently do not want to see their currencies appreciate because it makes their goods ________ expensive abroad and foreign goods ________ in their countries.

The net amount of international reserves that move between governments to finance international transactions is called the ________ balance.

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.

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

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

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