Question 1

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 2

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 3

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 4

During the period between World War I and World War II, the political reality was characterized by

Accepted Answer

A) halfhearted attempts and failure to restore the gold standard. 
B) political instabilities and bank failures. 
C) panicky flights of capital across borders. 
D) all of the above 
A) halfhearted attempts and failure to restore the gold standard. 
B) political instabilities and bank failures. 
C) panicky flights of capital across borders. 
D) all of the above

Question 5

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 6

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 7

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 8

RobertA. 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

The Triffin paradox

Accepted Answer

A) was first proposed by Professor Robert Triffin. 
B) warned that the gold-exchange system of the Bretton Woods agreement was programmed to collapse in the long run. 
C) was indeed responsible for the eventual collapse of the dollar-based gold-exchange system in the early 1970s. 
D) all of the above are correct 
A) was first proposed by Professor Robert Triffin. 
B) warned that the gold-exchange system of the Bretton Woods agreement was programmed to collapse in the long run. 
C) was indeed responsible for the eventual collapse of the dollar-based gold-exchange system in the early 1970s. 
D) all of the above are correct

Question 10

During the period of the classical gold standard (1875-1914) there were

Accepted Answer

A) highly volatile exchange rates. 
B) volatile exchange rates. 
C) moderately volatile exchange rates. 
D) stable exchange rates. 
E) no exchange rates. 
A) highly volatile exchange rates. 
B) volatile exchange rates. 
C) moderately volatile exchange rates. 
D) stable exchange rates. 
E) no exchange rates.

Question 11

Advantages of a flexible exchange rates include which of the following?

Accepted Answer

A) National policy autonomy. 
B) Easier external adjustments. 
C) The government can use monetary and fiscal policies to pursue whatever economic goals it chooses. 
D) All of the above 
A) National policy autonomy. 
B) Easier external adjustments. 
C) The government can use monetary and fiscal policies to pursue whatever economic goals it chooses. 
D) All of the above

Question 12

Once the changeover to the euro was completed by July 1, 2002, the legal-tender status of national currencies in the euro zone

Accepted Answer

A) was canceled, leaving the euro as the sole legal tender in the euro zone countries. 
B) was affirmed at the fixed exchange rate. 
C) was tied to gold. 
D) none of the above 
A) was canceled, leaving the euro as the sole legal tender in the euro zone countries. 
B) was affirmed at the fixed exchange rate. 
C) was tied to gold. 
D) none of the above

Question 13

Monetary policy for the countries using the euro as a currency is now conducted by

Accepted Answer

A) the Federal Reserve. 
B) the Bundesbank. 
C) European Central Bank. 
D) none of the above 
A) the Federal Reserve. 
B) the Bundesbank. 
C) European Central Bank. 
D) none of the above

Question 14

Suppose that the United States is on a bimetallic standard at $30 to one ounce of gold and $2 for one ounce of silver. If new silver mines open and flood the market with silver,

Accepted Answer

A) only the silver currency will circulate. 
B) only the gold currency will circulate. 
C) no change will take place since citizens could exchange their gold currency for silver currency at any time. 
D) none of the above 
A) only the silver currency will circulate. 
B) only the gold currency will circulate. 
C) no change will take place since citizens could exchange their gold currency for silver currency at any time. 
D) none of the above

Question 15

Under the Bretton Woods system, Each country was responsible for maintaining its exchange rate within ±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 16

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

Question 17

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 18

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 19

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 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 $1.80 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

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

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

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

During the period between World War I and World War II, the political reality was characterized by

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

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

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

The Triffin paradox

During the period of the classical gold standard (1875-1914) there were

Advantages of a flexible exchange rates include which of the following?

Once the changeover to the euro was completed by July 1, 2002, the legal-tender status of national currencies in the euro zone

Monetary policy for the countries using the euro as a currency is now conducted by

Suppose that the United States is on a bimetallic standard at $30 to one ounce of gold and $2 for one ounce of silver. If new silver mines open and flood the market with silver,

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

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

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

The Mexican peso crisis is significant in that

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

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

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

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

During the period between World War I and World War II, the political reality was characterized by

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

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

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

The Triffin paradox

During the period of the classical gold standard (1875-1914) there were

Advantages of a flexible exchange rates include which of the following?

Once the changeover to the euro was completed by July 1, 2002, the legal-tender status of national currencies in the euro zone

Monetary policy for the countries using the euro as a currency is now conducted by

Suppose that the United States is on a bimetallic standard at $30 to one ounce of gold and $2 for one ounce of silver. If new silver mines open and flood the market with silver,

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

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

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

The Mexican peso crisis is significant in that

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

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