Exam 19: The International Financial System

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

By the late 1950s,dollars held by foreign central banks exceeded the official dollar value of U.S.gold reserves.

Although the pegged exchange rate between the yuan and the dollar has undervalued the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would

Foreign purchases of stocks and bonds issued by U.S.corporations ________ between 1995 and 2007 and ________ in 2012.

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,purchasing power parity predicts that

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

The Bretton Woods system was established in 1944 and remained in place until the early 1970s.

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

The Bretton Woods system confronted severe problems in the 1960s,problems which included

Figure 19-7 -Refer to Figure 19-7.If the Indian government pegs its currency to the dollar at a value above $.02/rupee,we would say the currency is

What do reports that the dollar is "overvalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.

You decide to work in London for the next 5 years,accumulate some savings,then move back to the United States and convert your savings from British pounds to dollars.At the time of your move,economists predict that consumers in the United States have lost their affinity for British products,and expect that this declining preference for British products will continue for the next decade.How should this influence your decision to work and save in London?

Which of the following would decrease the value of the dollar in the long run?

The year in which euro coins and paper currency were introduced and participating "euro zone" countries withdrew old domestic currencies from circulation was

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

In 1991,Argentina decided to peg its currency (the Argentinean peso)to the U.S.dollar.To maintain the peg,Argentina had to purchase surplus pesos on the foreign exchange market,depleting its reserves of dollars to such an extent that it eventually had to abandon the peg.Show graphically what this implies about the peg relative to the equilibrium exchange rate in the market for the Argentinean peso.

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency,rather than choosing a floating exchange rate?

What are capital controls? Why might a financial crisis lead to a reconsideration of using capital controls,and what problems might result from the reinstatement of capital controls?

During the Chinese experience with pegging the yuan to the dollar,the yuan was ________.As a result,there was a ________ of dollars on the market,and the Chinese government had to purchase dollars to maintain the peg.

One reason purchasing power parity does not exactly hold is that many goods are not traded internationally.