Exam 3: The International Monetary System

World War I caused the suspension of the gold standard for fixed international exchange rates because the war

Regime structures like the gold standard required no cooperative policies among countries, only the assurance that all would abide by the "rules of the game."

Another name for the International Bank for Reconstruction and Development is ________.

In January 2002, the Argentine Peso changed in value from Peso1.00/$ to Peso1.40/$, thus, the Argentine Peso ________ against the U.S. dollar.

Which of the following is a way in which the euro affects markets?

The United States currently uses a ________ exchange rate regime.

Which of the following is NOT an argument against dollarization?

Under the terms of Bretton Woods countries tried to maintain the value of their currencies to within 1% of a hybrid security made up of the U.S. dollar, British pound, and Japanese yen.

Dollarization is a common solution for countries suffering from currency revaluation.

You have been hired as a consultant to the central bank for a country that has for many years suffered from repeated currency crises and depends heavily on the U.S. financial and product markets. Which of the following policies would have the greatest effectiveness for reducing currency volatility of the client country with the United States?

Which of the following correctly identifies exchange rate regimes from less fixed to more fixed?

According to the authors, what is the single most important mandate of the European Central Bank?

The European Central Bank is a strong and independent central bank that has completely replaced the individual central banks of the countries that use the euro as their currency.

The ability of a country to profit from its ability to print money is known as ________.

The mobility of international capital flows is causing emerging market nations to choose between a free-floating currency exchange regime and a currency board (or taken to the limit, dollarization). Describe how each of the regimes would work and identify at least two likely economic results for each regime.

Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods?

Based on the premise that, other things equal, countries would prefer a fixed exchange rate: Variable rates provide stability in international prices for the conduct of trade.

Which of the following is NOT an attribute of the "ideal" currency?

Members of the International Monetary Fund may settle transactions among themselves by transferring Special Drawing Rights (SDRs).

Beginning in 1991 Argentina conducted its monetary policy through a currency board. In January 2002, Argentina abandoned the currency board and allowed its currency to float against other currencies. The country took this step because