Question 1

The monetary system of bimetallism is unstable.Due to the fluctuation of the commercial value of the metals,

Accepted Answer

A) the metal with a commercial value lower than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law). 
B) the metal with a commercial value higher than the currency value tends to be used as money (Gresham's Law). 
C) the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law). 
D) none of the above 
A) the metal with a commercial value lower than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law). 
B) the metal with a commercial value higher than the currency value tends to be used as money (Gresham's Law). 
C) the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law). 
D) none of the above

Question 2

The Maastricht Treaty

Accepted Answer

A) irrevocably fixed exchange rates among the member currencies. 
B) commits the members of the European Union to political union as well as monetary union. 
C) was signed and subsequently ratified by the 12 member states. 
D) all of the above 
A) irrevocably fixed exchange rates among the member currencies. 
B) commits the members of the European Union to political union as well as monetary union. 
C) was signed and subsequently ratified by the 12 member states. 
D) all of the above

Question 3

Special Drawing Rights (SDR)are

Accepted Answer

A) an artificial international reserve allotted to the members of the International Monetary Fund (IMF), who can then use it for transactions among themselves or with the IMF. 
B) a "portfolio" of currencies, and its value tends to be more stable than the currencies that it is comprised of. 
C) used in addition to gold and foreign exchanges, to make international payments. 
D) all of the above 
A) an artificial international reserve allotted to the members of the International Monetary Fund (IMF), who can then use it for transactions among themselves or with the IMF. 
B) a "portfolio" of currencies, and its value tends to be more stable than the currencies that it is comprised of. 
C) used in addition to gold and foreign exchanges, to make international payments. 
D) all of the above

Question 4

Gold was officially abandoned as an international reserve asset

Accepted Answer

A) in the January 1976 Jamaica Agreement. 
B) in the 1971 Smithsonian Agreement. 
C) in the 1944 Bretton Woods Agreement. 
D) none of the above 
A) in the January 1976 Jamaica Agreement. 
B) in the 1971 Smithsonian Agreement. 
C) in the 1944 Bretton Woods Agreement. 
D) none of the above

Question 5

The growth of the Eurodollar market,which is a transnational,unregulated fund market

Accepted Answer

A) was encouraged by U.S.legislation designed to stem the outflow of dollars from the U.S. 
B) was discouraged by U.S.legislation designed to stem the outflow of dollars from the U.S. 
A) was encouraged by U.S.legislation designed to stem the outflow of dollars from the U.S. 
B) was discouraged by U.S.legislation designed to stem the outflow of dollars from the U.S.

Question 6

Under the gold standard,international imbalances of payment will be corrected automatically under the

Accepted Answer

A) Gresham Exchange Rate regime. 
B) European Monetary System. 
C) Price-specie-flow mechanism. 
D) Bretton Woods Accord. 
A) Gresham Exchange Rate regime. 
B) European Monetary System. 
C) Price-specie-flow mechanism. 
D) Bretton Woods Accord.

Question 7

In 1963,President John Kennedy imposed the Interest Equalization Tax (IET)on U.S.purchases of foreign securities.The IET was designed to

Accepted Answer

A) decrease the cost of foreign borrowing in the U.S.bond market. 
B) increase the cost of foreign borrowing in the U.S.bond market. 
A) decrease the cost of foreign borrowing in the U.S.bond market. 
B) increase the cost of foreign borrowing in the U.S.bond market.

Question 8

Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 per ounce.This implies an exchange rate of $1.75 per pound.If the current market exchange rate is $1.80 per pound,how would you take advantage of this situation? Hint: assume that you have $350 available for investment.

Accepted Answer

A) Start with $350.Buy 10 ounces of gold with dollars at $35 per ounce.Convert the gold to £200 at £20 per ounce.Exchange the £200 for dollars at the current rate of $1.80 per pound to get $360. 
B) Start with $350.Exchange the dollars for pounds at the current rate of $1.80 per pound.Buy gold with pounds at £20 per ounce.Convert the gold to dollars at $35 per ounce. 
C) a) and b) both work 
D) None of the above 
A) Start with $350.Buy 10 ounces of gold with dollars at $35 per ounce.Convert the gold to £200 at £20 per ounce.Exchange the £200 for dollars at the current rate of $1.80 per pound to get $360. 
B) Start with $350.Exchange the dollars for pounds at the current rate of $1.80 per pound.Buy gold with pounds at £20 per ounce.Convert the gold to dollars at $35 per ounce. 
C) a) and b) both work 
D) None of the above

Question 9

Under a purely flexible exchange rate system

Accepted Answer

A) supply and demand set the exchange rates. 
B) governments can set the exchange rate by buying or selling reserves. 
C) governments can set exchange rates with fiscal policy. 
D) answers b) and c) are correct. 
A) supply and demand set the exchange rates. 
B) governments can set the exchange rate by buying or selling reserves. 
C) governments can set exchange rates with fiscal policy. 
D) answers b) and c) are correct.

Question 10

Prior to the 1870s,both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents.Suppose that the dollar was pegged to gold at $30 per ounce,the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver,and the German mark pegged to silver at 1 mark per ounce of silver.What would the exchange rate between the U.S.dollar and German mark be under this system?

Accepted Answer

A) 1 German mark = $2 
B) 1 German mark = $0.50 
C) 1 German mark = $3 
D) 1 German mark = $1 
A) 1 German mark = $2 
B) 1 German mark = $0.50 
C) 1 German mark = $3 
D) 1 German mark = $1

Question 11

A central bank can fix an exchange rate

Accepted Answer

A) in perpetuity. 
B) only for as long as the market believes that it has the political will to do so. 
C) only for as long as it has reserves of gold. 
D) only for as long as it has independence of monetary policy. 
A) in perpetuity. 
B) only for as long as the market believes that it has the political will to do so. 
C) only for as long as it has reserves of gold. 
D) only for as long as it has independence of monetary policy.

Question 12

The single European currency,the euro,was adopted by 11 member nations on January 1 of what year?

Accepted Answer

A) 1984 
B) 1991 
C) 1999 
D) 2001 
A) 1984 
B) 1991 
C) 1999 
D) 2001

Question 13

The Exchange Rate Mechanism (ERM)is

Accepted Answer

A) the procedure by which ERM member countries collectively manage their exchange rates. 
B) based on a "parity-grid" system, which is a system of par values among ERM countries. 
C) a and b 
D) none of the above 
A) the procedure by which ERM member countries collectively manage their exchange rates. 
B) based on a "parity-grid" system, which is a system of par values among ERM countries. 
C) a and b 
D) none of the above

Question 14

To avoid currency crisis in the face of fully integrated capital markets,a country can have a

Accepted Answer

A) floating exchange rate. 
B) fixed exchange rate. 
C) fixed exchange rate that adjusts. 
D) a) and b) can both help to avoid currency crises. 
A) floating exchange rate. 
B) fixed exchange rate. 
C) fixed exchange rate that adjusts. 
D) a) and b) can both help to avoid currency crises.

Question 15

Advantages of a fixed exchange rate include

Accepted Answer

A) reduction in exchange rate risk for businesses. 
B) reduction in transactions costs. 
C) reduction in trading frictions. 
D) all of the above 
A) reduction in exchange rate risk for businesses. 
B) reduction in transactions costs. 
C) reduction in trading frictions. 
D) all of the above

Question 16

Gresham's Law states that

Accepted Answer

A) bad money drives good money out of circulation. 
B) good money drives bad money out of circulation. 
C) if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate. 
D) none of the above. 
A) bad money drives good money out of circulation. 
B) good money drives bad money out of circulation. 
C) if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate. 
D) none of the above.

Question 17

The international monetary system can be defined as the institutional framework within which

Accepted Answer

A) international payments are made. 
B) movement of capital is accommodated. 
C) exchange rates among currencies are determined. 
D) all of the above 
A) international payments are made. 
B) movement of capital is accommodated. 
C) exchange rates among currencies are determined. 
D) all of the above

Question 18

In the years leading to the collapse of the Bretton Woods system

Accepted Answer

A) it became clear that the dollar was undervalued. 
B) it became clear that the dollar was overvalued. 
A) it became clear that the dollar was undervalued. 
B) it became clear that the dollar was overvalued.

Question 19

The Mexican peso crisis is significant in that

Accepted Answer

A) it is perhaps the first serious international financial crisis touched off by cross-border flight of portfolio capital. 
B) selling by international portfolio managers had a highly destabilizing, contagious effect on the world financial system. 
C) it provides a cautionary tale that as the world's financial markets are becoming more integrated, this type of contagious financial crisis is likely to occur more often. 
D) all of the above. 
A) it is perhaps the first serious international financial crisis touched off by cross-border flight of portfolio capital. 
B) selling by international portfolio managers had a highly destabilizing, contagious effect on the world financial system. 
C) it provides a cautionary tale that as the world's financial markets are becoming more integrated, this type of contagious financial crisis is likely to occur more often. 
D) all of the above.

Question 20

Which country is NOT using the euro?

Accepted Answer

A) Greece 
B) Italy 
C) Sweden 
D) Portugal 
A) Greece 
B) Italy 
C) Sweden 
D) Portugal

The monetary system of bimetallism is unstable.Due to the fluctuation of the commercial value of the metals,

The Maastricht Treaty

Special Drawing Rights (SDR)are

Gold was officially abandoned as an international reserve asset

The growth of the Eurodollar market,which is a transnational,unregulated fund market

Under the gold standard,international imbalances of payment will be corrected automatically under the

In 1963,President John Kennedy imposed the Interest Equalization Tax (IET)on U.S.purchases of foreign securities.The IET was designed to

Under a purely flexible exchange rate system

A central bank can fix an exchange rate

The single European currency,the euro,was adopted by 11 member nations on January 1 of what year?

The Exchange Rate Mechanism (ERM)is

To avoid currency crisis in the face of fully integrated capital markets,a country can have a

Advantages of a fixed exchange rate include

Gresham's Law states that

The international monetary system can be defined as the institutional framework within which

In the years leading to the collapse of the Bretton Woods system

The Mexican peso crisis is significant in that

Which country is NOT using the euro?

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 2: International Monetary System

The monetary system of bimetallism is unstable.Due to the fluctuation of the commercial value of the metals,

The Maastricht Treaty

Special Drawing Rights (SDR)are

Gold was officially abandoned as an international reserve asset

The growth of the Eurodollar market,which is a transnational,unregulated fund market

Under the gold standard,international imbalances of payment will be corrected automatically under the

In 1963,President John Kennedy imposed the Interest Equalization Tax (IET)on U.S.purchases of foreign securities.The IET was designed to

Under a purely flexible exchange rate system

A central bank can fix an exchange rate

The single European currency,the euro,was adopted by 11 member nations on January 1 of what year?

The Exchange Rate Mechanism (ERM)is

To avoid currency crisis in the face of fully integrated capital markets,a country can have a

Advantages of a fixed exchange rate include

Gresham's Law states that

The international monetary system can be defined as the institutional framework within which

In the years leading to the collapse of the Bretton Woods system

The Mexican peso crisis is significant in that

Which country is NOT using the euro?

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters