Question 1

Since the end of the fixed exchange rate system of the Smithsonian agreement

Accepted Answer

A) exchange rates were revalued in the Bretton Woods agreement. 
B) exchange rates have been allowed to float. 
C) the United States returned to a gold standard. 
D) the zone of monetary stability has been limited to the U.S.,Canada,and Mexico. 
A) exchange rates were revalued in the Bretton Woods agreement. 
B) exchange rates have been allowed to float. 
C) the United States returned to a gold standard. 
D) the zone of monetary stability has been limited to the U.S.,Canada,and Mexico. B

Question 2

Prior to the Argentine Peso Crisis

Accepted Answer

A) Argentina had a "dirty float" where the government allowed the exchange rate to float within wide bands. 
B) Argentina had a currency board arrangement with the peso pegged to the U.S.dollar at parity. 
C) the Argentine government defaulted on its international debts. 
D) weakening of the U.S.dollar led the Argentine government to abandon dollarization. 
A) Argentina had a "dirty float" where the government allowed the exchange rate to float within wide bands. 
B) Argentina had a currency board arrangement with the peso pegged to the U.S.dollar at parity. 
C) the Argentine government defaulted on its international debts. 
D) weakening of the U.S.dollar led the Argentine government to abandon dollarization. D

Question 3

During the 1990s there

Accepted Answer

A) were three major currency crises. 
B) were two major currency crises. 
C) was only one currency crisis. 
D) were no major currency crises. 
A) were three major currency crises. 
B) were two major currency crises. 
C) was only one currency crisis. 
D) were no major currency crises. A

Question 4

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 options. 
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 options.

Question 5

The international monetary system went through several distinct stages of evolution.These stages are summarized,in alphabetic order,as follows: (i)Bimetallism
(ii)Bretton Woods system
(iii)Classical gold standard
(iv)Flexible exchange rate regime
(v)Interwar period
The chronological order that they actually occurred is:

Accepted Answer

A) (iii),(i),(iv),(ii),and (v) 
B) (i),(iii),(v),(ii),and (iv) 
C) (vi),(i),(iii),(ii),and (v) 
D) (v),(ii),(i),(iii),and (iv) 
A) (iii),(i),(iv),(ii),and (v) 
B) (i),(iii),(v),(ii),and (iv) 
C) (vi),(i),(iii),(ii),and (v) 
D) (v),(ii),(i),(iii),and (iv)

Question 6

The gold standard still has ardent supporters who believe that it provides

Accepted Answer

A) an effective hedge against price inflation. 
B) fixed exchange rates between all currencies. 
C) monetary policy autonomy. 
D) all of the options 
A) an effective hedge against price inflation. 
B) fixed exchange rates between all currencies. 
C) monetary policy autonomy. 
D) all of the options

Question 7

With regard to the current exchange rate arrangement between the U.S.and the U.K.,it is best characterized as

Accepted Answer

A) independent floating (market determined). 
B) managed float. 
C) currency board. 
D) pegged exchange rate within a horizontal band. 
A) independent floating (market determined). 
B) managed float. 
C) currency board. 
D) pegged exchange rate within a horizontal band.

Question 8

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 options 
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 options

Question 9

Ecuador does not have its own national currency,circulating the U.S.dollar instead.About how many countries do not have their own national currency?

Accepted Answer

A) 10 
B) 20 
C) 30 
D) 40 
A) 10 
B) 20 
C) 30 
D) 40

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

During the period between World War I and World War II,

Accepted Answer

A) the major European powers and the U.S.returned to the gold standard and fixed exchange rates. 
B) while most countries abandoned the gold standard during World War I,international trade and investment flourished during the interwar period under a coherent international monetary system. 
C) the U.S.dollar emerged as the dominant world currency,gradually replacing the British pound for the role. 
D) none of the options 
A) the major European powers and the U.S.returned to the gold standard and fixed exchange rates. 
B) while most countries abandoned the gold standard during World War I,international trade and investment flourished during the interwar period under a coherent international monetary system. 
C) the U.S.dollar emerged as the dominant world currency,gradually replacing the British pound for the role. 
D) none of the options

Question 12

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 13

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 9 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 14

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 these choices are correct. 
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 these choices are correct.

Question 15

A "good" (or ideal)international monetary system should provide

Accepted Answer

A) liquidity,elasticity,and flexibility. 
B) elasticity,sensitivity,and reliability. 
C) liquidity,adjustments,and confidence. 
D) none of the options 
A) liquidity,elasticity,and flexibility. 
B) elasticity,sensitivity,and reliability. 
C) liquidity,adjustments,and confidence. 
D) none of the options

Question 16

Generally speaking,a country would be more prone to asymmetric shocks

Accepted Answer

A) the more diversified and less trade-dependent its economy is. 
B) the less diversified and more trade-dependent its economy is. 
C) the less diversified and less trade-dependent its economy is. 
D) the more diversified and more trade-dependent its economy is. 
A) the more diversified and less trade-dependent its economy is. 
B) the less diversified and more trade-dependent its economy is. 
C) the less diversified and less trade-dependent its economy is. 
D) the more diversified and more trade-dependent its economy is.

Question 17

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

Accepted Answer

A) At an exchange rate of $1.80 = £1.00,demand for British pounds exceeds supply. 
B) At an exchange rate of $1.80 = £1.00,supply for British pounds exceeds demand. 
C) Under a flexible exchange rate regime,the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00. 
D) At an exchange rate of $1.80 = £1.00,demand for British pounds exceeds supply.Additionally,under a flexible exchange rate regime,the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00. 
A) At an exchange rate of $1.80 = £1.00,demand for British pounds exceeds supply. 
B) At an exchange rate of $1.80 = £1.00,supply for British pounds exceeds demand. 
C) Under a flexible exchange rate regime,the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00. 
D) At an exchange rate of $1.80 = £1.00,demand for British pounds exceeds supply.Additionally,under a flexible exchange rate regime,the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00.

Question 18

Under the Bretton Woods system each country established a par value for its currency in relation to the dollar.And the U.S.dollar was pegged to gold at

Accepted Answer

A) $1 per ounce. 
B) $35 per ounce. 
C) $350 per ounce. 
D) $900 per ounce. 
A) $1 per ounce. 
B) $35 per ounce. 
C) $350 per ounce. 
D) $900 per ounce.

Question 19

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 options 
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 options

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) both of the options 
D) none of the options 
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) both of the options 
D) none of the options

Since the end of the fixed exchange rate system of the Smithsonian agreement

Prior to the Argentine Peso Crisis

During the 1990s there

Gresham's Law states that

The gold standard still has ardent supporters who believe that it provides

With regard to the current exchange rate arrangement between the U.S.and the U.K.,it is best characterized as

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

Ecuador does not have its own national currency,circulating the U.S.dollar instead.About how many countries do not have their own national currency?

The G-7 is composed of

During the period between World War I and World War II,

In the EU,there is a

Special Drawing Rights (SDR)are

A "good" (or ideal)international monetary system should provide

Generally speaking,a country would be more prone to asymmetric shocks

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

Under the Bretton Woods system each country established a par value for its currency in relation to the dollar.And the U.S.dollar was pegged to gold at

The Maastricht Treaty

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 1: International Monetary System

Since the end of the fixed exchange rate system of the Smithsonian agreement

Prior to the Argentine Peso Crisis

During the 1990s there

Gresham's Law states that

The gold standard still has ardent supporters who believe that it provides

With regard to the current exchange rate arrangement between the U.S.and the U.K.,it is best characterized as

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

Ecuador does not have its own national currency,circulating the U.S.dollar instead.About how many countries do not have their own national currency?

The G-7 is composed of

During the period between World War I and World War II,

In the EU,there is a

Special Drawing Rights (SDR)are

A "good" (or ideal)international monetary system should provide

Generally speaking,a country would be more prone to asymmetric shocks

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

Under the Bretton Woods system each country established a par value for its currency in relation to the dollar.And the U.S.dollar was pegged to gold at

The Maastricht Treaty

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