Exam 16: The International Financial System

In September 1992, the Bundesbank attempted to keep the mark from appreciating relative to the British pound, but it failed because participants in the foreign exchange market came to expect the

If the current account balance shows a surplus, and capital account receipts exceed capital account payments, then the net change in government international reserves must be ________, indicating a(n)________ in U.S. international reserves.

The difference between merchandise exports and imports is called the current account balance.

What kind of exchange rate system did the Bretton Woods agreement establish?

A dirty float is

The Bretton Woods system was one in which central banks

The Bretton Woods agreement created the ________, which was given the task of promoting the growth of world trade by setting rules for the maintenance of fixed exchange rates and by making loans to countries that were experiencing balance of payments difficulties.

What was the European Monetary System? How did its exchange rate mechanism work?

Under a fixed exchange rate regime, when the domestic currency is undervalued, the central bank must ________ the domestic currency to keep the exchange rate fixed; as a result, it ________ international reserves.

Because sterilized interventions mean offsetting open market operations, there is no impact on the monetary base and the money supply, and therefore a sterilized intervention

A foreign exchange intervention with an offsetting open market operation that leaves the monetary base unchanged is called

When a reserve currency country runs a balance of payments deficit and a nonreserve currency country buys the reserve currency to finance the reserve country's deficits, the monetary base in the nonreserve country ________ and the monetary base in the reserve country ________.

Explain graphically how a country must intervene in the foreign exchange market under a fixed exchange rate regime if its currency is undervalued.

Seigniorage is

A balance of payments ________ is associated with a ________ of international reserves.

The current account balance plus the capital account balance equals

Revaluation of a currency's value occurs when

Under a fixed exchange rate system,

Which of the following appears in the capital account part of the balance of payments?

The difference between merchandise exports and imports is called the