Question 1

In 2009,the net financial account balance was approximately

Accepted Answer

A)  $780 billion. 
B)  -$790 billion. 
C)  $215 billion. 
D)  -$215 billion. 
A)  $780 billion. 
B)  -$790 billion. 
C)  $215 billion. 
D)  -$215 billion. C

Question 2

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

Accepted Answer

Restrictions on capital inflows receive more support from some economists than do restrictions on capital outflows,in part because such inflows often lead to domestic lending booms and increased risk taking by domestic banks.

Question 3

Capital inflow restrictions

Accepted Answer

A)  receive less support from economists than full capital controls. 
B)  may lessen domestic lending booms and risk-taking by domestic banks. 
C)  were imposed in the United States during the late 1990s. 
D)  were imposed in Europe in May 2000. 
A)  receive less support from economists than full capital controls. 
B)  may lessen domestic lending booms and risk-taking by domestic banks. 
C)  were imposed in the United States during the late 1990s. 
D)  were imposed in Europe in May 2000. B

Question 4

Which of the following is NOT considered a payment in the balance of payments?

Accepted Answer

A)  capital outflows 
B)  U.S. foreign aid to other countries 
C)  imports of goods 
D)  exports of services 
A)  capital outflows 
B)  U.S. foreign aid to other countries 
C)  imports of goods 
D)  exports of services

Question 5

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

Accepted Answer

A)  a country experiencing a balance of payments surplus was limited in its ability to defend its exchange rate by its stock of international reserves. 
B)  a country experiencing a balance of payments deficit was limited in its ability to defend its exchange rate by its stock of international reserves. 
C)  central banks were allowed by the IMF to adjust their exchange rates upward whenever they chose, but were rarely allowed to adjust their exchange rates downward. 
D)  central banks were allowed by the IMF to adjust their exchange rates downward whenever they chose, but were rarely allowed to adjust their exchange rates upward. 
A)  a country experiencing a balance of payments surplus was limited in its ability to defend its exchange rate by its stock of international reserves. 
B)  a country experiencing a balance of payments deficit was limited in its ability to defend its exchange rate by its stock of international reserves. 
C)  central banks were allowed by the IMF to adjust their exchange rates upward whenever they chose, but were rarely allowed to adjust their exchange rates downward. 
D)  central banks were allowed by the IMF to adjust their exchange rates downward whenever they chose, but were rarely allowed to adjust their exchange rates upward.

Question 6

Which of the following statements is correct?

Accepted Answer

A)  A devaluation of the British pound would result in more dollars to the pound. 
B)  A revaluation of the British pound would raise the prices of U.S. goods in Britain. 
C)  A devaluation of the British pound would lower the prices of British goods in the United States. 
D)  Revaluations and devaluations of a country's currency were not allowed under the Bretton Woods system. 
A)  A devaluation of the British pound would result in more dollars to the pound. 
B)  A revaluation of the British pound would raise the prices of U.S. goods in Britain. 
C)  A devaluation of the British pound would lower the prices of British goods in the United States. 
D)  Revaluations and devaluations of a country's currency were not allowed under the Bretton Woods system.

Question 7

Why do some economists think a global savings glut contributed to the U.S.running a current account deficit in the 2000s?

Accepted Answer

Several developing economies in Asia and

Question 8

Discuss the problems associated with the imposition of capital controls.

Accepted Answer

First,with capital controls,domestic fir

Question 9

An unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency will result in

Accepted Answer

A)  higher domestic interest rates. 
B)  lower domestic interest rates. 
C)  an increase in the money supply. 
D)  lower domestic interest rates and an increase in the money supply. 
A)  higher domestic interest rates. 
B)  lower domestic interest rates. 
C)  an increase in the money supply. 
D)  lower domestic interest rates and an increase in the money supply.

Question 10

If the Fed wants to reduce the value of the dollar,it will

Accepted Answer

A)  sell foreign assets and buy dollars. 
B)  sell dollars and buy foreign assets. 
C)  buy foreign assets and also buy dollars. 
D)  sell foreign assets and also sell dollars. 
A)  sell foreign assets and buy dollars. 
B)  sell dollars and buy foreign assets. 
C)  buy foreign assets and also buy dollars. 
D)  sell foreign assets and also sell dollars.

Question 11

If the Fed wants to increase the value of the dollar,it will

Accepted Answer

A)  sell foreign securities and buy dollars in international currency markets. 
B)  buy foreign securities and sell dollars in international currency markets. 
C)  buy foreign securities and also buy dollars in international currency markets. 
D)  sell foreign securities and also sell dollars in international currency markets. 
A)  sell foreign securities and buy dollars in international currency markets. 
B)  buy foreign securities and sell dollars in international currency markets. 
C)  buy foreign securities and also buy dollars in international currency markets. 
D)  sell foreign securities and also sell dollars in international currency markets.

Question 12

When a central bank buys foreign assets,

Accepted Answer

A)  its holdings of foreign assets rise by the amount of the purchase, but the monetary base is unaffected. 
B)  its holdings of foreign assets and the monetary base rise by the amount of the purchase. 
C)  its holdings of foreign assets rise by the amount of the purchase, and the monetary base rises by the amount of the purchase times the money multiplier. 
D)  the monetary base falls by the amount of the purchase. 
A)  its holdings of foreign assets rise by the amount of the purchase, but the monetary base is unaffected. 
B)  its holdings of foreign assets and the monetary base rise by the amount of the purchase. 
C)  its holdings of foreign assets rise by the amount of the purchase, and the monetary base rises by the amount of the purchase times the money multiplier. 
D)  the monetary base falls by the amount of the purchase.

Question 13

An unsterilized foreign-exchange intervention occurs

Accepted Answer

A)  whenever a central bank purchases or sells domestic currency. 
B)  whenever a central bank purchases or sells foreign currency. 
C)  whenever a central bank allows the monetary base to respond to the sale or purchase of domestic currency. 
D)  whenever a central bank fails to reduce its holdings of gold by the amount of a foreign-exchange purchase. 
A)  whenever a central bank purchases or sells domestic currency. 
B)  whenever a central bank purchases or sells foreign currency. 
C)  whenever a central bank allows the monetary base to respond to the sale or purchase of domestic currency. 
D)  whenever a central bank fails to reduce its holdings of gold by the amount of a foreign-exchange purchase.

Question 14

Briefly describe how the Bretton Woods system worked.What advantages did it have over the gold standard? What problems did the Bretton Woods system eventually encounter?

Accepted Answer

Under the Bretton Woods system,the Unite

Question 15

Fixed exchange rate regimes

Accepted Answer

A)  existed prior to the nineteenth century but were then superseded by the gold standard. 
B)  lower the transactions costs of buying and selling goods and assets. 
C)  result in higher world interest rates. 
D)  were first established by the GATT in 1971. 
A)  existed prior to the nineteenth century but were then superseded by the gold standard. 
B)  lower the transactions costs of buying and selling goods and assets. 
C)  result in higher world interest rates. 
D)  were first established by the GATT in 1971.

Question 16

When a nation is said to be running a balance of payments surplus,this means its

Accepted Answer

A)  official settlements balance is positive. 
B)  trade balance is positive. 
C)  net financial account balance is positive. 
D)  current account is positive. 
A)  official settlements balance is positive. 
B)  trade balance is positive. 
C)  net financial account balance is positive. 
D)  current account is positive.

Question 17

At the 1976 IMF conference in Jamaica,

Accepted Answer

A)  the United States reaffirmed its commitment to buy and sell gold at a fixed price. 
B)  currencies were formally allowed to float. 
C)  the major countries of the world agreed to continue a system of fixed exchange rates. 
D)  the gold standard was reestablished. 
A)  the United States reaffirmed its commitment to buy and sell gold at a fixed price. 
B)  currencies were formally allowed to float. 
C)  the major countries of the world agreed to continue a system of fixed exchange rates. 
D)  the gold standard was reestablished.

Question 18

A central bank may be reluctant to see its currency appreciate because

Accepted Answer

A)  rising prices of imports will contribute to inflation. 
B)  falling prices of exports will contribute to inflation. 
C)  the country's goods may become uncompetitive in world markets. 
D)  the country's monetary base will increase. 
A)  rising prices of imports will contribute to inflation. 
B)  falling prices of exports will contribute to inflation. 
C)  the country's goods may become uncompetitive in world markets. 
D)  the country's monetary base will increase.

Question 19

Make use of a graph of the foreign exchange market to show how the Brazilian Central Bank can use an unsterilized intervention to reduce the value of its currency,the real,in terms of the dollar.

Accepted Answer

An unsterilized intervention by the cent

Question 20

Currently,the dominant reserve currency is the

Accepted Answer

A)  U.S. dollar. 
B)  Japanese yen. 
C)  euro. 
D)  British pound. 
A)  U.S. dollar. 
B)  Japanese yen. 
C)  euro. 
D)  British pound.

In 2009,the net financial account balance was approximately

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

Capital inflow restrictions

Which of the following is NOT considered a payment in the balance of payments?

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

Which of the following statements is correct?

Why do some economists think a global savings glut contributed to the U.S.running a current account deficit in the 2000s?

Discuss the problems associated with the imposition of capital controls.

An unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency will result in

If the Fed wants to reduce the value of the dollar,it will

If the Fed wants to increase the value of the dollar,it will

When a central bank buys foreign assets,

An unsterilized foreign-exchange intervention occurs

Briefly describe how the Bretton Woods system worked.What advantages did it have over the gold standard? What problems did the Bretton Woods system eventually encounter?

Fixed exchange rate regimes

When a nation is said to be running a balance of payments surplus,this means its

At the 1976 IMF conference in Jamaica,

A central bank may be reluctant to see its currency appreciate because

Make use of a graph of the foreign exchange market to show how the Brazilian Central Bank can use an unsterilized intervention to reduce the value of its currency,the real,in terms of the dollar.

Currently,the dominant reserve currency is the

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 16: The International Financial System and Monetary Policy

In 2009,the net financial account balance was approximately

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

Capital inflow restrictions

Which of the following is NOT considered a payment in the balance of payments?

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

Which of the following statements is correct?

Why do some economists think a global savings glut contributed to the U.S.running a current account deficit in the 2000s?

Discuss the problems associated with the imposition of capital controls.

An unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency will result in

If the Fed wants to reduce the value of the dollar,it will

If the Fed wants to increase the value of the dollar,it will

When a central bank buys foreign assets,

An unsterilized foreign-exchange intervention occurs

Briefly describe how the Bretton Woods system worked.What advantages did it have over the gold standard? What problems did the Bretton Woods system eventually encounter?

Fixed exchange rate regimes

When a nation is said to be running a balance of payments surplus,this means its

At the 1976 IMF conference in Jamaica,

A central bank may be reluctant to see its currency appreciate because

Make use of a graph of the foreign exchange market to show how the Brazilian Central Bank can use an unsterilized intervention to reduce the value of its currency,the real,in terms of the dollar.

Currently,the dominant reserve currency is the

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters