Question 1

Which factors are related to the collapse of the Argentine currency board system and ensuing economic crisis?

Accepted Answer

A) The lack of fiscal discipline on the part of the Argentine government 
B) Labor market inflexibility 
C) Contagion from the financial crises in Russia and Brazil 
D) All of the above 
A) The lack of fiscal discipline on the part of the Argentine government 
B) Labor market inflexibility 
C) Contagion from the financial crises in Russia and Brazil 
D) All of the above

Question 2

The Mexican Peso Crisis was touched off by

Accepted Answer

A) an unsurprising announcement by the Mexican government to devalue to peso against the dollar by 14 percent. 
B) an unexpected announcement by the Mexican government to devalue to peso against the dollar by 14 percent. 
C) an announcement by the Mexican government to enact a currency board arrangement with the U.S.dollar. 
D) contagion from other Latin American and Asian financial markets. 
A) an unsurprising announcement by the Mexican government to devalue to peso against the dollar by 14 percent. 
B) an unexpected announcement by the Mexican government to devalue to peso against the dollar by 14 percent. 
C) an announcement by the Mexican government to enact a currency board arrangement with the U.S.dollar. 
D) contagion from other Latin American and Asian financial markets.

Question 3

An "international" gold standard can be said to exist when

Accepted Answer

A) gold alone is assured of unrestricted coinage. 
B) there is two-way convertibility between gold and national currencies at stable ratios. 
C) gold may be freely exported or imported. 
D) all of the above 
A) gold alone is assured of unrestricted coinage. 
B) there is two-way convertibility between gold and national currencies at stable ratios. 
C) gold may be freely exported or imported. 
D) all of the above

Question 4

In the EU,there is a

Accepted Answer

A) low degree of fiscal integration among EU countries. 
B) high degree of fiscal integration among EU countries. 
A) low degree of fiscal integration among EU countries. 
B) high degree of fiscal integration among EU countries.

Question 5

Under the Bretton Woods system,each country was responsible for maintaining its exchange rate within $\pm$1 percent of the adopted par value by

Accepted Answer

A) buying or selling foreign exchanges as necessary. 
B) buying or selling gold as necessary. 
C) expanding or contracting the supply of loanable funds as necessary. 
D) increasing or decreasing their money supply as necessary. 
A) buying or selling foreign exchanges as necessary. 
B) buying or selling gold as necessary. 
C) expanding or contracting the supply of loanable funds as necessary. 
D) increasing or decreasing their money supply as necessary.

Question 6

Generally speaking,liberalization of financial markets when combined with a weak,underdeveloped domestic financial system tends to

Accepted Answer

A) strengthen the domestic financial system in the short run. 
B) create an environment susceptible to currency and financial crises. 
C) raise interest rates and lead to domestic recession. 
D) none of the above 
A) strengthen the domestic financial system in the short run. 
B) create an environment susceptible to currency and financial crises. 
C) raise interest rates and lead to domestic recession. 
D) none of the above

Question 7

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Accepted Answer

A) To "fix" the exchange rate at $1.80 = £1.00, the Federal Reserve could use contractionary monetary policy to shift the demand curve to the left. 
B) To "fix" the exchange rate at $1.80 = £1.00, the U.S.government could use contractionary fiscal policy to shift the demand curve to the left. 
C) The British Government could use fiscal or monetary policy to shift the supply curve to the right to fix the exchange rate to $1.80 = £1.00. 
D) All of the above. 
A) To "fix" the exchange rate at $1.80 = £1.00, the Federal Reserve could use contractionary monetary policy to shift the demand curve to the left. 
B) To "fix" the exchange rate at $1.80 = £1.00, the U.S.government could use contractionary fiscal policy to shift the demand curve to the left. 
C) The British Government could use fiscal or monetary policy to shift the supply curve to the right to fix the exchange rate to $1.80 = £1.00. 
D) All of the above.

Question 8

Robert A.Mundell won the Nobel Memorial Prize in Economic Science.He was

Accepted Answer

A) one of the intellectual fathers of both the new European common currency and Reagan-era supply-side economics 
B) one of the intellectual fathers of both the new European common currency and Reagan-era Keynesian economics 
C) one of the intellectual fathers of both the Bretton Woods currency agreement and Keynesian economics 
D) none of the above 
A) one of the intellectual fathers of both the new European common currency and Reagan-era supply-side economics 
B) one of the intellectual fathers of both the new European common currency and Reagan-era Keynesian economics 
C) one of the intellectual fathers of both the Bretton Woods currency agreement and Keynesian economics 
D) none of the above

Question 9

When money can move freely across borders,policy makers must choose between

Accepted Answer

A) exchange-rate stability and an economic growth. 
B) exchange-rate stability and inflation. 
C) exchange-rate stability and an independent monetary policy. 
D) exchange-rate stability and capital controls. 
A) exchange-rate stability and an economic growth. 
B) exchange-rate stability and inflation. 
C) exchange-rate stability and an independent monetary policy. 
D) exchange-rate stability and capital controls.

Question 10

The G-7 is composed of

Accepted Answer

A) Canada, France, Japan, Germany, Italy, the U.K., and the United States. 
B) Switzerland, France, Japan, Germany, Italy, the U.K., and the United States. 
C) Switzerland, France, North Korea, Germany, Italy, the U.K., and the United States. 
D) Switzerland, France, Japan, Germany, Canada, the U.K., and the United States. 
A) Canada, France, Japan, Germany, Italy, the U.K., and the United States. 
B) Switzerland, France, Japan, Germany, Italy, the U.K., and the United States. 
C) Switzerland, France, North Korea, Germany, Italy, the U.K., and the United States. 
D) Switzerland, France, Japan, Germany, Canada, the U.K., and the United States.

Question 11

The euro zone is remarkably comparable to the United States in terms of

Accepted Answer

A) population size. 
B) GDP. 
C) international trade share. 
D) all of the above 
A) population size. 
B) GDP. 
C) international trade share. 
D) all of the above

Question 12

Suppose that country A and country B are both on a bimetallic standard.In country A the ratio is 15 to one (i.e.an ounce of gold is worth 15 times as much as an ounce of silver in that currency),while in country B the ratio is ten to one.If the free flow of capital is allowed between countries A and B is this a sustainable framework?

Accepted Answer

A) Yes 
B) No 
C) There is not enough information to make an informed determination. 
A) Yes 
B) No 
C) There is not enough information to make an informed determination.

Question 13

According to the "Trilemma" a country can attain only two of the following three conditions: 1)A fixed exchange rate,(2)Free international flows of capital,(3)An independent monetary policy.This difficulty is also known as

Accepted Answer

A) the incompatible trinity. 
B) the Trilemma. 
C) the Tobin tax. 
D) all three can be had at the same time 
A) the incompatible trinity. 
B) the Trilemma. 
C) the Tobin tax. 
D) all three can be had at the same time

Question 14

Willem Duisenberg,the first president of the European Central Bank,defined "price stability" as an annual inflation rate of

Accepted Answer

A) "no more than five percent." 
B) "less than but close to 2 percent." 
C) "absolutely no more than zero percent." 
D) "no more than three percent." 
A) "no more than five percent." 
B) "less than but close to 2 percent." 
C) "absolutely no more than zero percent." 
D) "no more than three percent."

Question 15

During the period between World War I and World War II,many central banks followed a policy of sterilization of gold

Accepted Answer

A) by restricting the rate of growth in the supply of gold. 
B) by matching inflows and outflows of gold respectively with reductions and increases in domestic money and credit. 
C) by matching inflows and outflows of gold respectively with increases and reductions in domestic money and credit. 
D) none of the above. 
A) by restricting the rate of growth in the supply of gold. 
B) by matching inflows and outflows of gold respectively with reductions and increases in domestic money and credit. 
C) by matching inflows and outflows of gold respectively with increases and reductions in domestic money and credit. 
D) none of the above.

Question 16

Following the demise of the Bretton Woods system,the IMF

Accepted Answer

A) created a new role for itself, providing loans to countries facing balance-of-payments and exchange rate difficulties. 
B) ceased to exist, since the era of fixed exchange rates had ended. 
C) became the sole agent responsible for maintaining fixed exchange rates. 
D) became the central bank of the United Nations. 
A) created a new role for itself, providing loans to countries facing balance-of-payments and exchange rate difficulties. 
B) ceased to exist, since the era of fixed exchange rates had ended. 
C) became the sole agent responsible for maintaining fixed exchange rates. 
D) became the central bank of the United Nations.

Question 17

Following the introduction of the euro,the national central banks of the euro-12 nations

Accepted Answer

A) disbanded. 
B) formed the ESCB, which is analogous to the Federal Reserve System in the U.S. 
C) continue to perform important functions in their jurisdictions. 
D) b) and c) are correct 
A) disbanded. 
B) formed the ESCB, which is analogous to the Federal Reserve System in the U.S. 
C) continue to perform important functions in their jurisdictions. 
D) b) and c) are correct

Question 18

A currency board arrangement is

Accepted Answer

A) when the currency of another country circulates as the sole legal tender. 
B) when the country belongs to a monetary or currency union in which the same legal tender is shared by the members of the union. 
C) a monetary regime based on an explicit legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate, combined with restrictions on the issuing authority to ensure the fulfillment of its legal obligation. 
D) where the country pegs its currency at a fixed rate to a major currency where the exchange rate fluctuates within a narrow margin of less than one percent. 
A) when the currency of another country circulates as the sole legal tender. 
B) when the country belongs to a monetary or currency union in which the same legal tender is shared by the members of the union. 
C) a monetary regime based on an explicit legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate, combined with restrictions on the issuing authority to ensure the fulfillment of its legal obligation. 
D) where the country pegs its currency at a fixed rate to a major currency where the exchange rate fluctuates within a narrow margin of less than one percent.

Question 19

The European Monetary System (EMS)has the chief objective(s)

Accepted Answer

A) to establish a "zone of monetary stability" in Europe. 
B) to coordinate exchange rate policies vis-à-vis the non-EMS currencies. 
C) to pave the way for the eventual European monetary union. 
D) all of the above 
A) to establish a "zone of monetary stability" in Europe. 
B) to coordinate exchange rate policies vis-à-vis the non-EMS currencies. 
C) to pave the way for the eventual European monetary union. 
D) all of the above

Question 20

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 $1.60 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 $1.60 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 $1.60 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

Which factors are related to the collapse of the Argentine currency board system and ensuing economic crisis?

The Mexican Peso Crisis was touched off by

An "international" gold standard can be said to exist when

In the EU,there is a

Under the Bretton Woods system,each country was responsible for maintaining its exchange rate within $\pm$ 1 percent of the adopted par value by

Generally speaking,liberalization of financial markets when combined with a weak,underdeveloped domestic financial system tends to

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Robert A.Mundell won the Nobel Memorial Prize in Economic Science.He was

When money can move freely across borders,policy makers must choose between

The G-7 is composed of

The euro zone is remarkably comparable to the United States in terms of

According to the "Trilemma" a country can attain only two of the following three conditions: 1)A fixed exchange rate,(2)Free international flows of capital,(3)An independent monetary policy.This difficulty is also known as

Willem Duisenberg,the first president of the European Central Bank,defined "price stability" as an annual inflation rate of

During the period between World War I and World War II,many central banks followed a policy of sterilization of gold

Following the demise of the Bretton Woods system,the IMF

Following the introduction of the euro,the national central banks of the euro-12 nations

A currency board arrangement is

The European Monetary System (EMS)has the chief objective(s)

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

Which factors are related to the collapse of the Argentine currency board system and ensuing economic crisis?

The Mexican Peso Crisis was touched off by

An "international" gold standard can be said to exist when

In the EU,there is a

Under the Bretton Woods system,each country was responsible for maintaining its exchange rate within ±\pm± 1 percent of the adopted par value by

Generally speaking,liberalization of financial markets when combined with a weak,underdeveloped domestic financial system tends to

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Robert A.Mundell won the Nobel Memorial Prize in Economic Science.He was

When money can move freely across borders,policy makers must choose between

The G-7 is composed of

The euro zone is remarkably comparable to the United States in terms of

According to the "Trilemma" a country can attain only two of the following three conditions: 1)A fixed exchange rate,(2)Free international flows of capital,(3)An independent monetary policy.This difficulty is also known as

Willem Duisenberg,the first president of the European Central Bank,defined "price stability" as an annual inflation rate of

During the period between World War I and World War II,many central banks followed a policy of sterilization of gold

Following the demise of the Bretton Woods system,the IMF

Following the introduction of the euro,the national central banks of the euro-12 nations

A currency board arrangement is

The European Monetary System (EMS)has the chief objective(s)

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

Under the Bretton Woods system,each country was responsible for maintaining its exchange rate within $\pm$ 1 percent of the adopted par value by