Question 1

When a central bank buys foreign assets,

Accepted Answer

A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected. 
A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected.

Question 2

Make use of a T-account to show the effect of the Fed's sale of $500 million worth of government securities on the Fed's balance sheet.(assume the Fed receives a check from the sale of securities)

Accepted Answer

The Fed's assets decline as it

Question 3

Currently,the price of gold is

Accepted Answer

A)  fixed by the United States. 
B)  adjusted periodically by the IMF. 
C)  adjusted periodically by the World Bank. 
D)  determined in the market by demand and supply. 
A)  fixed by the United States. 
B)  adjusted periodically by the IMF. 
C)  adjusted periodically by the World Bank. 
D)  determined in the market by demand and supply.

Question 4

Why may a central bank intervene in the foreign exchange market when its currency is depreciating?

Accepted Answer

A)  concerns about the country's exports becoming less competitive 
B)  concerns about inflation 
C)  concerns about deflation 
D)  to sterilize the effects on the domestic economy 
A)  concerns about the country's exports becoming less competitive 
B)  concerns about inflation 
C)  concerns about deflation 
D)  to sterilize the effects on the domestic economy

Question 5

Under the gold standard,if the demand for U.S.goods increased,which of the following would happen?

Accepted Answer

A)  Gold would flow into the United States. 
B)  The U.S. monetary base would decline. 
C)  Prices in the United States would fall. 
D)  The United States would experience a balance of trade deficit. 
A)  Gold would flow into the United States. 
B)  The U.S. monetary base would decline. 
C)  Prices in the United States would fall. 
D)  The United States would experience a balance of trade deficit.

Question 6

When someone in a country buys an asset abroad,the transaction is recorded

Accepted Answer

A)  in the current account. 
B)  in the official settlements balance. 
C)  in the financial account as a capital inflow. 
D)  in the financial account as a capital outflow. 
A)  in the current account. 
B)  in the official settlements balance. 
C)  in the financial account as a capital inflow. 
D)  in the financial account as a capital outflow.

Question 7

Make use of a T-account to show the effect of the Fed's purchase of $5 billion worth of foreign government securities on the Fed's balance sheet (note: assume the Fed writes a check to purchase the securities)

Accepted Answer

The Fed's assets increase as i

Question 8

When the Fed sells foreign assets and buy domestic assets at the same time,

Accepted Answer

A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected. 
A)  its assets and liabilities rise by the same amount. 
B)  its assets and liabilities fall by the same amount. 
C)  the composition of its assets changes, but its liabilities are unaffected. 
D)  the composition of its liabilities changes, but its assets are unaffected.

Question 9

Deliberate actions by a central bank to influence the exchange rate are known as

Accepted Answer

A)  current account actions. 
B)  foreign-exchange market interventions. 
C)  dollar-value operations. 
D)  foreign-commerce maneuvers. 
A)  current account actions. 
B)  foreign-exchange market interventions. 
C)  dollar-value operations. 
D)  foreign-commerce maneuvers.

Question 10

If the central bank buys foreign assets,

Accepted Answer

A)  the domestic monetary base will decline. 
B)  domestic short-term interest rates will decline. 
C)  the foreign-exchange value of the domestic currency will rise. 
D)  its holdings of international reserves will rise. 
A)  the domestic monetary base will decline. 
B)  domestic short-term interest rates will decline. 
C)  the foreign-exchange value of the domestic currency will rise. 
D)  its holdings of international reserves will rise.

Question 11

If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency,

Accepted Answer

A)  the central bank's holdings of international reserves will fall. 
B)  the domestic money supply will rise. 
C)  domestic interest rates will fall. 
D)  it will buy foreign assets. 
A)  the central bank's holdings of international reserves will fall. 
B)  the domestic money supply will rise. 
C)  domestic interest rates will fall. 
D)  it will buy foreign assets.

Question 12

In the early 1930s

Accepted Answer

A)  countries that abandoned the gold standard suffered severe inflation. 
B)  countries that tried to defend the gold standard suffered more depression than countries that abandoned the gold standard. 
C)  the gold standard was abandoned by every major industrial country except England. 
D)  the United States was the first major industrial country to abandon the gold standard. 
A)  countries that abandoned the gold standard suffered severe inflation. 
B)  countries that tried to defend the gold standard suffered more depression than countries that abandoned the gold standard. 
C)  the gold standard was abandoned by every major industrial country except England. 
D)  the United States was the first major industrial country to abandon the gold standard.

Question 13

If the U.S.current account balance is positive,

Accepted Answer

A)  U.S. citizens must have purchased more merchandise abroad than they sold abroad. 
B)  the foreign-exchange value of the dollar must be rising. 
C)  the foreign-exchange value of the dollar must be falling. 
D)  U.S. citizens have funds to lend to foreigners. 
A)  U.S. citizens must have purchased more merchandise abroad than they sold abroad. 
B)  the foreign-exchange value of the dollar must be rising. 
C)  the foreign-exchange value of the dollar must be falling. 
D)  U.S. citizens have funds to lend to foreigners.

Question 14

If the U.S.dollar were to cease to be the leading international reserve currency,

Accepted Answer

A)  U.S. households and businesses would be unaffected. 
B)  U.S. households and businesses would be subject to increased exchange rate risk. 
C)  interest rates in the U.S. would be lower. 
D)  the U.S. monetary base would contract. 
A)  U.S. households and businesses would be unaffected. 
B)  U.S. households and businesses would be subject to increased exchange rate risk. 
C)  interest rates in the U.S. would be lower. 
D)  the U.S. monetary base would contract.

Question 15

A sale of foreign assets by a central bank has the same effect on the monetary base as

Accepted Answer

A)  a decrease in the discount rate. 
B)  a decrease in the required reserve ratio. 
C)  an open market sale of government bonds. 
D)  an open market purchase of government bonds. 
A)  a decrease in the discount rate. 
B)  a decrease in the required reserve ratio. 
C)  an open market sale of government bonds. 
D)  an open market purchase of government bonds.

Question 16

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

Accepted Answer

A)  Domestic interest rates will rise. 
B)  The foreign-exchange value of the domestic currency will rise. 
C)  The central bank will experience a decrease in international reserves. 
D)  The domestic money supply will rise. 
A)  Domestic interest rates will rise. 
B)  The foreign-exchange value of the domestic currency will rise. 
C)  The central bank will experience a decrease in international reserves. 
D)  The domestic money supply will rise.

Question 17

If the Fed sells $1 billion of short-term securities issued by the Bank of Japan and at the same time purchases $1 billion of short-term securities issued by the U.S.Treasury,

Accepted Answer

A)  the monetary base will decline by $1 billion. 
B)  the monetary base will rise by $1 billion. 
C)  the Fed has conducted an unsterilized foreign-exchange intervention. 
D)  the Fed has conducted a sterilized foreign-exchange intervention. 
A)  the monetary base will decline by $1 billion. 
B)  the monetary base will rise by $1 billion. 
C)  the Fed has conducted an unsterilized foreign-exchange intervention. 
D)  the Fed has conducted a sterilized foreign-exchange intervention.

Question 18

The official settlement balance

Accepted Answer

A)  is an amount that the IMF requires each member country to pay annually. 
B)  must by definition always be zero. 
C)  equals the current account balance divided by the capital account balance. 
D)  equals the net increase in a country's official reserve assets. 
A)  is an amount that the IMF requires each member country to pay annually. 
B)  must by definition always be zero. 
C)  equals the current account balance divided by the capital account balance. 
D)  equals the net increase in a country's official reserve assets.

Question 19

Throughout most of the post-World War II period,the use of capital controls by governments around the world was declining.But in the late 1990s,a number of governments expressed renewed interest in capital controls.What accounts for this renewed interest?

Accepted Answer

The major currency crises during this pe

Question 20

Under the Bretton Woods system the international reserve currency was the

Accepted Answer

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

When a central bank buys foreign assets,

Make use of a T-account to show the effect of the Fed's sale of $500 million worth of government securities on the Fed's balance sheet.(assume the Fed receives a check from the sale of securities)

Currently,the price of gold is

Why may a central bank intervene in the foreign exchange market when its currency is depreciating?

Under the gold standard,if the demand for U.S.goods increased,which of the following would happen?

When someone in a country buys an asset abroad,the transaction is recorded

Make use of a T-account to show the effect of the Fed's purchase of $5 billion worth of foreign government securities on the Fed's balance sheet (note: assume the Fed writes a check to purchase the securities)

When the Fed sells foreign assets and buy domestic assets at the same time,

Deliberate actions by a central bank to influence the exchange rate are known as

If the central bank buys foreign assets,

If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency,

In the early 1930s

If the U.S.current account balance is positive,

If the U.S.dollar were to cease to be the leading international reserve currency,

A sale of foreign assets by a central bank has the same effect on the monetary base as

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

If the Fed sells $1 billion of short-term securities issued by the Bank of Japan and at the same time purchases $1 billion of short-term securities issued by the U.S.Treasury,

The official settlement balance

Throughout most of the post-World War II period,the use of capital controls by governments around the world was declining.But in the late 1990s,a number of governments expressed renewed interest in capital controls.What accounts for this renewed interest?

Under the Bretton Woods system the international reserve currency was 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

When a central bank buys foreign assets,

Make use of a T-account to show the effect of the Fed's sale of $500 million worth of government securities on the Fed's balance sheet.(assume the Fed receives a check from the sale of securities)

Currently,the price of gold is

Why may a central bank intervene in the foreign exchange market when its currency is depreciating?

Under the gold standard,if the demand for U.S.goods increased,which of the following would happen?

When someone in a country buys an asset abroad,the transaction is recorded

Make use of a T-account to show the effect of the Fed's purchase of $5 billion worth of foreign government securities on the Fed's balance sheet (note: assume the Fed writes a check to purchase the securities)

When the Fed sells foreign assets and buy domestic assets at the same time,

Deliberate actions by a central bank to influence the exchange rate are known as

If the central bank buys foreign assets,

If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency,

In the early 1930s

If the U.S.current account balance is positive,

If the U.S.dollar were to cease to be the leading international reserve currency,

A sale of foreign assets by a central bank has the same effect on the monetary base as

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

If the Fed sells $1 billion of short-term securities issued by the Bank of Japan and at the same time purchases $1 billion of short-term securities issued by the U.S.Treasury,

The official settlement balance

Throughout most of the post-World War II period,the use of capital controls by governments around the world was declining.But in the late 1990s,a number of governments expressed renewed interest in capital controls.What accounts for this renewed interest?

Under the Bretton Woods system the international reserve currency was 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