Exam 3: The International Monetary System

Which of the following is NOT a required convergence criteria to become a full member of the European Economic and Monetary Union (EMU)?

The Euro currency is fixed against other currencies on the international currency exchange markets, but allows member country currencies to float against each other.

Bretton Woods required less in the way of cooperation among countries than did the gold standard.

In the decade since 2000, the U.S. has experienced its largest bilateral trade deficits with the countries of China and Japan.

A small economy country whose GDP is heavily dependent on trade with the United States could use a (an)________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.

For the three years from early 2002 to early 2005, the euro maintained a strong and steady rise in value against the U.S. dollar (USD). Which of the following were NOT a contributing factor in the assent of the euro and the decline in the dollar?

The authors discuss the concept of the "Impossible Trinity" or the inability to achieve simultaneously the goals of exchange rate stability, full financial integration, and monetary independence. If a country chooses to have a pure float exchange rate regime, which two of the three goals is a country most able to achieve?

Most Western nations were on the gold standard for currency exchange rates from 1876 until 1914. Today we have several different exchange rate regimes in use, but most larger economy nations have freely floating exchange rates today and are not obligated to convert their currency into a predetermined amount of gold on demand. Today several parties still call for the "good old days" and a return to the gold standard. Develop an argument as to why this is a good idea.

The International Monetary Fund (IMF)

Of the following, which is NOT a trade-off that must be dealt with in any exchange rate regime?

Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange regime was

The IMF's exchange rate regime classification identifies ________ as the most rigidly fixed, and ________ as the least fixed.

All exchange rate regimes must deal with the trade-off between rules and discretion as well as between cooperation and independence.

In January 2000 Ecuador officially replaced its national currency, the Ecuadorian sucre, with the U.S. dollar. This practice is known as ________.

Based on the premise that, other things equal, countries would prefer a fixed exchange rate, which of the following statements is NOT true?

If exchange rates were fixed, investors and traders would be relatively certain about the current and near future exchange value of each currency.

Today, the United States has been ejected from the International Monetary Fund for refusal to pay annual dues.

The post WWII international monetary agreement that was developed in 1944 is known as the ________.

A currency board exists when a country's central bank commits to back its money supply entirely with foreign reserves at all times.