Question 1

The principal goal of the Treaty of Maastricht was the creation of a

Accepted Answer

A)  fixed exchange rate system. 
B)  floating exchange rate system. 
C)  gold-exchange system. 
D)  monetary union.

Question 2

The principal result of the rising value of the U.S.dollar in the mid-1990s was a(n)

Accepted Answer

A)  balance of payments deficit. 
B)  balance of payments surplus. 
C)  increase in the rate of inflation. 
D)  increase in the unemployment rate.

Question 3

The demand for euros would come from

Accepted Answer

A)  American exports to Europe. 
B)  European demand for U.S.government bonds. 
C)  American demand for European real estate. 
D)  All of the above are correct.

Question 4

The supply of euros would come from

Accepted Answer

A)  American demand for European real estate. 
B)  European demand for U.S.government bonds. 
C)  Americans vacationing in Barcelona,Spain. 
D)  French supplies of wine to U.S.importers.

Question 5

Under the Bretton Woods system,a country with a balance of payments deficit

Accepted Answer

A)  could get loans from the U.S.government. 
B)  could devalue if deflationary policies failed to eliminate the deficit. 
C)  was not allowed to devalue under any circumstance. 
D)  was required to devalue its currency immediately.

Question 6

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

Accepted Answer

A) True 
 B)False

Question 7

Why is the international financial system today often called a "nonsystem?"

Accepted Answer

The answer of Why is the international financial system today...

Question 8

When a government influences the exchange rate of its currency,it is said to be practicing "dirty floating."

Accepted Answer

A) True 
 B)False

Question 9

There is an exchange rate between

Accepted Answer

A)  every pair of currencies. 
B)  the world's major currencies but not between the currencies of less-developed countries. 
C)  currencies on a fixed-exchange rate system but not for those on a floating-rate system. 
D)  the currencies of the European Union but not for the nations outside the European Union.

Question 10

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac,fries,and a Coke cost $3.91 in San Francisco,how much should the same order cost in yen in Osaka?

Accepted Answer

A)  0.03 
B)  325 
C)  392 
D)  422

Question 11

A freely floating exchange rate brings some risks to people who are actively engaged in foreign trade.

Accepted Answer

A) True 
 B)False

Question 12

In order to "defend" its overvalued currency,Argentina in 2002 had to reduce its

Accepted Answer

A)  interest rates. 
B)  tax levels. 
C)  holdings of foreign reserves. 
D)  balance of payments surpluses.

Question 13

The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

Accepted Answer

A) True 
 B)False

Question 14

Assume that the information in Table 19-1 applies to the cost per ton of coal in 1998.Assume that also over a 10-year period prices rise 100 percent in Great Britain and 200 percent in the United States.According to the purchasing power parity theory,the exchange rate between the dollar and the pound in the year 2008 will be

Accepted Answer

A)  one dollar = two pounds. 
B)  one pound = two dollars. 
C)  one pound = three dollars. 
D)  one dollar = three pounds.

Question 15

A balance of payments deficit is defined as the amount by which

Accepted Answer

A)  a country's exports exceed its imports. 
B)  a currency must appreciate in order to reach equilibrium. 
C)  quantity supplied of a country's currency exceeds quantity demanded. 
D)  quantity demanded of a country's currency exceeds quantity supplied.

Question 16

In 2007,the value of the U.S.dollar

Accepted Answer

A)  increased relative to the euro. 
B)  decreased relative to the euro. 
C)  remained stable relative to the euro. 
D)  was equal to the value of the euro.

Question 17

An economic boom in America should increase the

Accepted Answer

A)  demand for U.S.dollars. 
B)  demand for U.S.goods and services. 
C)  demand for foreign currencies. 
D)  supply of foreign currencies.

Question 18

The gold standard established fixed exchange rates among all countries.

Accepted Answer

A) True 
 B)False

Question 19

Figure 19-2 
-Of the graphs in Figure 19-2,where the broken line represents the fixed exchange rate,which one shows a reduction in the price level in Japan that would reduce a balance of payments deficit?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Question 20

An economic boom in the United States will tend to cause booms in other countries because as U.S.GDP rises,U.S.

Accepted Answer

A)  tariffs will automatically fall. 
B)  exports will rise. 
C)  imports will rise. 
D)  exports will fall.

Exam 19: The International Monetary System Order Or Disorder

The principal goal of the Treaty of Maastricht was the creation of a

The principal result of the rising value of the U.S.dollar in the mid-1990s was a(n)

The demand for euros would come from

The supply of euros would come from

Under the Bretton Woods system,a country with a balance of payments deficit

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

Why is the international financial system today often called a "nonsystem?"

When a government influences the exchange rate of its currency,it is said to be practicing "dirty floating."

There is an exchange rate between

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac,fries,and a Coke cost $3.91 in San Francisco,how much should the same order cost in yen in Osaka?

A freely floating exchange rate brings some risks to people who are actively engaged in foreign trade.

In order to "defend" its overvalued currency,Argentina in 2002 had to reduce its

The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

A balance of payments deficit is defined as the amount by which

In 2007,the value of the U.S.dollar

An economic boom in America should increase the

The gold standard established fixed exchange rates among all countries.

Figure 19-2 -Of the graphs in Figure 19-2,where the broken line represents the fixed exchange rate,which one shows a reduction in the price level in Japan that would reduce a balance of payments deficit?

An economic boom in the United States will tend to cause booms in other countries because as U.S.GDP rises,U.S.