Exam 30: The International Financial System

Which aspects of globalization help to increase growth in the world economy?

Firms in Thailand that had ________ while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Explain why international capital markets have expanded since the 1980s.

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

If the rate of inflation in the United States exceeds the rate of inflation in Great Britain we would expect the U.S. dollar to depreciate in value against the British pound.

The "Big Mac Theory of Exchange Rates" tests the accuracy of the purchasing power parity theory. In July 2013, the Economist reported that the average price of a Big Mac in the U.S. was $4.56. In Sweden, the average price of a Big Mac at that time was 41.6 kronor. What is the "implied exchange rate" between Swedish kronor and U.S. dollars?

An increase in a fixed exchange rate from $2.00 per pound to $2.10 per pound is called a(n) ________ of the pound.

Figure 30-10 -Refer to Figure 30-10. Under the Bretton Woods System of exchange rates, if the par exchange rate was $2 per pound in the figure above, and equilibrium persisted at $3, then this was evidence of ________ and the IMF would allow a ________ in the exchange rate.

In 2012, foreign purchases of U.S. corporate stocks and bonds

Figure 30-9 -Refer to Figure 30-9. According to the graph, is there a surplus or shortage of Saudi Arabian riyal in exchange for U.S. dollars? To maintain the pegged exchange rate, will the Saudi central bank need to buy riyal in exchange for dollars or sell riyal in exchange for dollars? How many riyal will the Saudi central bank need to buy or sell?

In the United States today, how much gold will the Federal Reserve give you in exchange for $1?

Figure 30-6 -Refer to Figure 30-6. Which of the following would cause the change depicted in the figure above?

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Fluctuating exchange rates can alter a multinational firm's profits and losses. The U.S. corporation, Motorola, produces cell phones and sells cell phones in Mexico. If the dollar appreciates against the peso, then Motorola's revenues from these operations should ________ and its costs from these operations should ________.

Figure 30-10 -Refer to Figure 30-10. Under the Bretton Woods System of exchange rates, if the par exchange rate was $4 per pound in the figure above, then which of the following is true?

In order to reduce or eliminate a chronic shortage in the market for a currency under a fixed exchange rate system, we must devalue the currency.

China began pegging its currency, the yuan, to the dollar in 1994. Because the yuan has been ________ at the pegged exchange rate, the Chinese government ________ its reserves of dollars as the government purchased more ________ to maintain the pegged exchange rate.

The exchange rate system agreed to in 1944, in which the U.S. government agreed to buy or sell gold at a fixed price of $35 per ounce, is referred to as

If the GDP deflator in the United States is 114, and the GDP deflator in Ukraine is 142, which of the following changes would the theory of purchasing power parity predict? (The Ukrainian currency is the hryvnia.)

The gold in Fort Knox backs all U.S. currency.