Question 1

What is destabilizing speculation? What role did it play in the collapse of the Bretton Woods system?

Accepted Answer

Destabilizing speculation refers to acti

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Figure 30-12  
-If speculators believe a currency is undervalued, their trades in international exchange markets will

Accepted Answer

A)  increase the surplus of the currency at the existing fixed exchange rate. 
B)  decrease the surplus of the currency at the existing fixed exchange rate. 
C)  decrease the shortage of the currency at the existing fixed exchange rate. 
D)  increase the shortage of the currency at the existing fixed exchange rate. 
A)  increase the surplus of the currency at the existing fixed exchange rate. 
B)  decrease the surplus of the currency at the existing fixed exchange rate. 
C)  decrease the shortage of the currency at the existing fixed exchange rate. 
D)  increase the shortage of the currency at the existing fixed exchange rate.

Question 4

Figure 30-7  
-Refer to Figure 30-7. If the Indian government pegs its currency to the dollar at a value above $.02/rupee, we would say the currency is

Accepted Answer

A)  undervalued. 
B)  overvalued. 
C)  parity valued. 
D)  equilibrium valued. 
A)  undervalued. 
B)  overvalued. 
C)  parity valued. 
D)  equilibrium valued.

Question 5

The currency adopted by most countries in ________ is referred to as the euro.

Accepted Answer

A)  Western Europe 
B)  Eastern Europe 
C)  Europe and Asia 
D)  Southern Europe and Northern Africa 
A)  Western Europe 
B)  Eastern Europe 
C)  Europe and Asia 
D)  Southern Europe and Northern Africa

Question 6

By 2013, ________ members of the European Union were using the euro as their currency.

Accepted Answer

A)  12 
B)  17 
C)  28 
D)  57 
A)  12 
B)  17 
C)  28 
D)  57

Question 7

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

Accepted Answer

A)  unable to conduct monetary policy. 
B)  unable to conduct fiscal policy. 
C)  using currency which is backed by gold. 
D)  using a floating currency. 
A)  unable to conduct monetary policy. 
B)  unable to conduct fiscal policy. 
C)  using currency which is backed by gold. 
D)  using a floating currency.

Question 8

The three most important financial centers in the world today are New York, London, and Tokyo.

Accepted Answer

A) True 
 B)False

Question 9

During what period of time did the United States most consistently adhere to the gold standard?

Accepted Answer

A)  from the nineteenth century until the 1930s 
B)  from the eighteenth century until the nineteenth century 
C)  from 1914 until 1929 
D)  from 1944 until 1980 
A)  from the nineteenth century until the 1930s 
B)  from the eighteenth century until the nineteenth century 
C)  from 1914 until 1929 
D)  from 1944 until 1980

Question 10

Figure 30-1  
-Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

Accepted Answer

A)  European productivity rises relative to American productivity. 
B)  Americans decrease their preferences for goods produced in the EU relative to American goods. 
C)  The European Union increases its quotas on German wristwatches. 
D)  The price level of goods produced in the EU increases relative to the price level of goods produced in the United States. 
A)  European productivity rises relative to American productivity. 
B)  Americans decrease their preferences for goods produced in the EU relative to American goods. 
C)  The European Union increases its quotas on German wristwatches. 
D)  The price level of goods produced in the EU increases relative to the price level of goods produced in the United States.

Question 11

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?

Accepted Answer

Capital controls refer to limits on the

Question 12

If the U.S. government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will ________ and the demand for the undervalued currency will ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 13

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?

Accepted Answer

A)  You should be discouraged as the declining U.S. preference for British goods should increase the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
B)  You should be discouraged as the declining U.S. preference for British goods should decrease the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
C)  You should be encouraged as the declining U.S. preference for British goods should decrease the value of the pound to the dollar and raise the value of your savings when converted to dollars. 
D)  You should be encouraged as the declining U.S. preference for British goods should increase the value of the pound to the dollar and raise the value of your savings when converted to dollars. 
A)  You should be discouraged as the declining U.S. preference for British goods should increase the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
B)  You should be discouraged as the declining U.S. preference for British goods should decrease the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
C)  You should be encouraged as the declining U.S. preference for British goods should decrease the value of the pound to the dollar and raise the value of your savings when converted to dollars. 
D)  You should be encouraged as the declining U.S. preference for British goods should increase the value of the pound to the dollar and raise the value of your savings when converted to dollars.

Question 14

Before 1980, U.S. investors rarely invested in foreign capital markets.

Accepted Answer

A) True 
 B)False

Question 15

Before 1980, most U.S. corporations raised funds

Accepted Answer

A)  in U.S. and foreign banks. 
B)  in U.S. stock and bond markets or in U.S. banks. 
C)  in U.S. stock and bond markets or in foreign capital markets. 
D)  in U.S. banks or in foreign capital markets. 
A)  in U.S. and foreign banks. 
B)  in U.S. stock and bond markets or in U.S. banks. 
C)  in U.S. stock and bond markets or in foreign capital markets. 
D)  in U.S. banks or in foreign capital markets.

Question 16

Increasing a fixed exchange rate is called a revaluation.

Accepted Answer

A) True 
 B)False

Question 17

If currencies around the world are based on the gold standard, and Japan raises the amount of gold for which the yen will trade, then holding all else constant,

Accepted Answer

A)  the yen will depreciate against the dollar. 
B)  the yen will appreciate against the dollar. 
C)  the value of the yen relative to the dollar will stay constant. 
D)  the value of U.S. exports to Japan in terms of the yen will increase. 
A)  the yen will depreciate against the dollar. 
B)  the yen will appreciate against the dollar. 
C)  the value of the yen relative to the dollar will stay constant. 
D)  the value of U.S. exports to Japan in terms of the yen will increase.

Question 18

The three most important international financial centers today are

Accepted Answer

A)  New York, Los Angeles, and London. 
B)  London, Tokyo, and Beijing. 
C)  San Francisco, Paris, and Mexico City. 
D)  Tokyo, London, and New York. 
A)  New York, Los Angeles, and London. 
B)  London, Tokyo, and Beijing. 
C)  San Francisco, Paris, and Mexico City. 
D)  Tokyo, London, and New York.

Question 19

When the value of a currency is determined mostly by demand and supply, but with occasional government intervention, the exchange rate system is defined as

Accepted Answer

A)  fixed. 
B)  floating. 
C)  managed float. 
D)  Bretton Woods. 
A)  fixed. 
B)  floating. 
C)  managed float. 
D)  Bretton Woods.

Question 20

Figure 30-1  
-Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

Accepted Answer

A)  U.S. productivity falls relative to European productivity. 
B)  Americans increase their preferences for goods produced in the EU relative to American goods. 
C)  The European Union increases its quotas on Italian wine. 
D)  The price level of goods produced in the EU decreases relative to the price level of goods produced in the United States. 
A)  U.S. productivity falls relative to European productivity. 
B)  Americans increase their preferences for goods produced in the EU relative to American goods. 
C)  The European Union increases its quotas on Italian wine. 
D)  The price level of goods produced in the EU decreases relative to the price level of goods produced in the United States.

Exam 30: The International Financial System

What is destabilizing speculation? What role did it play in the collapse of the Bretton Woods system?

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

Figure 30-12 -If speculators believe a currency is undervalued, their trades in international exchange markets will

Figure 30-7 -Refer to Figure 30-7. If the Indian government pegs its currency to the dollar at a value above $.02/rupee, we would say the currency is

The currency adopted by most countries in ________ is referred to as the euro.

By 2013, ________ members of the European Union were using the euro as their currency.

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

The three most important financial centers in the world today are New York, London, and Tokyo.

During what period of time did the United States most consistently adhere to the gold standard?

Figure 30-1 -Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

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?

If the U.S. government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will ________ and the demand for the undervalued currency will ________.

Before 1980, U.S. investors rarely invested in foreign capital markets.

Before 1980, most U.S. corporations raised funds

Increasing a fixed exchange rate is called a revaluation.

If currencies around the world are based on the gold standard, and Japan raises the amount of gold for which the yen will trade, then holding all else constant,

The three most important international financial centers today are

When the value of a currency is determined mostly by demand and supply, but with occasional government intervention, the exchange rate system is defined as

Figure 30-1 -Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

If the U.S. government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will and the demand for the undervalued currency will .