Exam 3: The International Monetary System

Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, a country that has given up their own sovereignty over monetary policy is considered to have:

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 euro is an example of a rigidly fixed system, acting as a single currency for its member countries. However, the euro itself is an independently floating currency against all other currencies.

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

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?

The countries that use the euro as their currency have:

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.

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. Currently 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 members of the EU do have relative freedom to set their own fiscal policies- government spending, taxation, and the creation of government surpluses or deficits. They are expected to keep deficit spending within limits.

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

Another name for the International Bank for Reconstruction and Development is:

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:

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."

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

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

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

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

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

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