Exam 30: The International Financial System

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

In 1991,Argentina decided to peg its currency (the Argentinean peso)to the U.S.dollar.Most of Argentina's trading,however,was with Brazil and Europe,not the United States.What result would pegging the Argentinean peso to the U.S.dollar have on the cost of imports from and exports to Brazil and Europe?

Destabilizing speculation refers to

Figure 30-4 -Refer to Figure 30-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

South Korea suffered a destabilizing speculation in the late 1990s.This had the effect of ________ for the won.South Korean government tried to counteract this by raising interest rates which should have ________ the won.

The United States abandoned the Bretton Woods system of exchange rates in

What three real-world complications keep purchasing power parity from being a complete explanation of exchange rate fluctuations in the long run? Explain.

Figure 30-3 -Refer to Figure 30-3.If the Thai government pegs its currency to the dollar at a value above $.03/baht,we would say the currency is

Will the use of the euro help increase economic growth in countries in the European Union? Will it help individual countries using the euro in times of recession? Explain.

Managed float exchange systems were abandoned with the implementation of the gold standard.

If a country's currency is determined only by the demand and supply for that country's currency,the country is said to have a

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.

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

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.

Because the value of the euro is determined by factors that affect the entire euro zone,during the recession of 2007-2009,individual countries using the euro

Figure 30-7 -Refer to Figure 30-7.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?

Figure 30-8 -Refer to Figure 30-8.The graph above depicts supply and demand for British pounds during a trading day,where the quantity is millions of pounds.In order to support a fixed exchange rate of $2.00 per pound,the U.S.central bank must

If the implied exchange rate between Big Mac prices in the United States and Poland is 2.13 zlotys per dollar,but the actual exchange rate between the United States and Poland is 3.16 zlotys per dollar,which of the following would you expect to see?

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

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?