Exam 18: The International Financial System

When the domestic currency is initially undervalued in a fixed exchange rate regime,the central bank must intervene in the foreign exchange market to ________ the domestic currency,thereby allowing the money supply to ________.

Because many emerging market countries have not developed the political or monetary institutions that allow the successful use of discretionary monetary policy,

A central bank's attempt to prevent an appreciation of its currency can stimulate domestic inflation if the ________ of foreign currencies leads to ________ international reserves which ________ the monetary base.

If a central bank does not want to see its currency ________ in value,it may pursue expansionary monetary policy to lower the domestic interest rate,thereby ________ its currency.

In response to the overvalued dollar in the early 1970s,the German Bundesbank bought ________ and sold ________ to keep the exchange rate fixed,gaining international reserves.

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

Which of the following is not an advantage to exchange-rate targeting?

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

The revenue a government gains from issuing money is

Countries with surpluses in their balance of payments frequently do not want to see their currencies ________ because it makes their goods ________ expensive abroad.

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

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

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

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.

To keep from running out of international reserves under the Bretton Woods system,a country had to implement ________ monetary policy to ________ its currency.

In response to the overvalued dollar in the early 1970s,the German Bundesbank bought dollars and sold marks to keep the exchange rate fixed,gaining international reserves.The huge purchase of international reserves meant that the German monetary base began to ________,leading to ________ growth in the German money supply.

The East Asia currency crisis in 1997 started in

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

A current account surplus indicates that America is ________ its claims on foreign wealth,while a deficit indicates that this country is ________ its claims on foreign wealth.

Two reasons for an industrialized country to adopt an exchange-rate targeting regime are if the country ________ conduct successful monetary policy on its own,and if the country wants to ________ integration of the domestic economy with its neighbors.