Exam 18: The International Financial System

Under a fixed exchange rate regime,a central bank that does not want to acquire international reserves to keep its currency from ________ will decide to ________ its currency.

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

Under a fixed exchange rate regime,if a central bank must intervene to purchase the ________ currency by selling ________ assets,then,like an open market sale,this action reduces the monetary base and the money supply,causing the interest rate on domestic assets to rise.

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

Exchange-rate targeting is not an option for the United States because

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

The monetary policy strategy that provides an automatic rule for the conduct of monetary policy is

The World Bank is an international organization that:

Under the Exchange Rate Mechanism of the European Monetary System,when the British pound depreciated below its lower limit against the German mark,the German central bank was required to buy ________ and sell ________,thereby ________ international reserves.

A balance of payments deficit is associated with a ________ of international reserves,while a balance of payments surplus is associated with a ________.

Economists closely follow the current account balance because they believe it can provide information on the future movement of

Under a fixed exchange rate regime,if the domestic currency is initially undervalued,that is,above par,the central bank must intervene to sell the ________ currency by purchasing ________ assets.

Because central banks have not been willing to give up their option of intervening in the foreign exchange market,the current international financial system can best be described as a

A monetary policy strategy that uses a fixed exchange rate regime that ties the value of a currency to the currency of a large,low inflation country is called ________ targeting.

When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency,then the country is said to have

As a result of its power to dictate loan terms to borrowing countries (under the Bretton Woods system),the IMF could encourage ________ countries to pursue ________ monetary policies that would strengthen their currency or eliminate their balance of payments deficits.

Under the Bretton Woods system,the United States was designated as the