Exam 2: The International Monetary System

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 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.

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

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 IMF's methodology for classifying exchange rate regimes today is based on the official policy statement of the respective governments,de jure classification.

Which of the following statements is NOT true?

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

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 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 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.

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

The countries that use the euro as their currency have:

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

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

According to the terminology associated with changes in currency values,which of the following choices is the case when a currency's value relative to other currencies is changed by a government?

Since March 1973,when exchange rates become more volatile and less predictable than during the "fixed" exchange rate period,the nominal exchange rate index of the U.S.dollar peaked in 2011.

China today is a clear example of a nation that has chosen the following policies EXCEPT:

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

From the time of its creation through July 2012,the euro peaked versus the USD in April 2008 at around $1.60/€.

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