Question 1

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." B

Question 2

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A) the metal with a commercial value lower than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law).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C) the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law).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A) the metal with a commercial value lower than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law).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C) the metal with a commercial value higher than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law).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 C

Question 3

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 4

The price-specie-flow mechanism will work only if governments are willing to play by the rules of the game by letting the money stock rise and fall as gold flows in and out. Once the government demonetizes (neutralizes) gold, the mechanism will break down. In addition, the effectiveness of the mechanism depends on

Accepted Answer

A) the income elasticity of the demand for imports. 
B) the price elasticity of the demand for imports. 
C) the price elasticity of the supply of imports. 
D) the income elasticity of the supply of imports. 
A) the income elasticity of the demand for imports. 
B) the price elasticity of the demand for imports. 
C) the price elasticity of the supply of imports. 
D) the income elasticity of the supply of imports.

Question 5

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 6

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 7

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 8

The Asian Currency Crisis

Accepted Answer

A) happened just prior to the Mexican peso crisis. 
B) turned out to be far more serious than the Mexican peso crisis in terms of the extent of contagion. 
C) was limited to Asian currencies. 
D) was almost over before anyone outside the pacific rim noticed. 
A) happened just prior to the Mexican peso crisis. 
B) turned out to be far more serious than the Mexican peso crisis in terms of the extent of contagion. 
C) was limited to Asian currencies. 
D) was almost over before anyone outside the pacific rim noticed.

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

Under the Bretton Woods system

Accepted Answer

A) there was an explicit set of rules about the conduct of international monetary policies. 
B) each country was responsible for maintaining its exchange rate within 1 percent of the adopted par value by buying or selling foreign exchanges as necessary. 
C) the U.S. dollar was the only currency that was fully convertible to gold. 
D) all of the above 
A) there was an explicit set of rules about the conduct of international monetary policies. 
B) each country was responsible for maintaining its exchange rate within 1 percent of the adopted par value by buying or selling foreign exchanges as necessary. 
C) the U.S. dollar was the only currency that was fully convertible to gold. 
D) all of the above

Question 11

Benefits from adopting a common European currency include

Accepted Answer

A) reduced transaction costs. 
B) elimination of exchange rate risk. 
C) increased price transparency will promote Europe-wide competition. 
D) all of the above 
A) reduced transaction costs. 
B) elimination of exchange rate risk. 
C) increased price transparency will promote Europe-wide competition. 
D) all of the above

Question 12

Put the following in correct date order:

Accepted Answer

A) Jamaica Agreement, Bretton Woods Agreement, Smithsonian Agreement. 
B) Smithsonian Agreement, Bretton Woods Agreement, Jamaica Agreement. 
C) Bretton Woods Agreement, Smithsonian Agreement, Jamaica Agreement. 
D) Bretton Woods Agreement, Jamaica Agreement, Smithsonian Agreement. 
A) Jamaica Agreement, Bretton Woods Agreement, Smithsonian Agreement. 
B) Smithsonian Agreement, Bretton Woods Agreement, Jamaica Agreement. 
C) Bretton Woods Agreement, Smithsonian Agreement, Jamaica Agreement. 
D) Bretton Woods Agreement, Jamaica Agreement, Smithsonian Agreement.

Question 13

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 14

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 15

At the outbreak of World War I

Accepted Answer

A) major countries such as Great Britain, France, Germany and Russia suspended redemption of banknotes in gold. 
B) major countries such as Great Britain, France, Germany and Russia imposed embargoes on the export of gold. 
C) the classical gold standard was abandoned. 
D) all of the above 
A) major countries such as Great Britain, France, Germany and Russia suspended redemption of banknotes in gold. 
B) major countries such as Great Britain, France, Germany and Russia imposed embargoes on the export of gold. 
C) the classical gold standard was abandoned. 
D) all of the above

Question 16

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 17

Another name for the incompatible trinity is the

Accepted Answer

A) Tobin Tax. 
B) Triffin Paradox. 
C) Trilemma. 
D) None of the above 
A) Tobin Tax. 
B) Triffin Paradox. 
C) Trilemma. 
D) None of the above

Question 18

With regard to the current exchange rate arrangement between Italy and Germany, it is best characterized as

Accepted Answer

A) independent floating (market determined). 
B) managed float. 
C) an exchange arrangement with no separate legal tender. 
D) pegged exchange rate within a horizontal band. 
A) independent floating (market determined). 
B) managed float. 
C) an exchange arrangement with no separate legal tender. 
D) pegged exchange rate within a horizontal band.

Question 19

A booming economy with a fixed or stable nominal exchange rate

Accepted Answer

A) inevitably brings about an appreciation of the real exchange rate. 
B) inevitably brings about a depreciation of the real exchange rate. 
C) inevitably brings about a stabilization of the real exchange rate. 
D) inevitably brings about increased volatility of the real exchange rate. 
A) inevitably brings about an appreciation of the real exchange rate. 
B) inevitably brings about a depreciation of the real exchange rate. 
C) inevitably brings about a stabilization of the real exchange rate. 
D) inevitably brings about increased volatility of the real exchange rate.

Question 20

The euro zone 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

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

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

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

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

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

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

The Asian Currency Crisis

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?

Under the Bretton Woods system

Benefits from adopting a common European currency include

Put the following in correct date order:

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

At the outbreak of World War I

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?

Another name for the incompatible trinity is the

With regard to the current exchange rate arrangement between Italy and Germany, it is best characterized as

A booming economy with a fixed or stable nominal exchange rate

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

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

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

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

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

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

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

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

The Asian Currency Crisis

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?

Under the Bretton Woods system

Benefits from adopting a common European currency include

Put the following in correct date order:

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

At the outbreak of World War I

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?

Another name for the incompatible trinity is the

With regard to the current exchange rate arrangement between Italy and Germany, it is best characterized as

A booming economy with a fixed or stable nominal exchange rate

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

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