Question 1

Which of the following is NOT an argument against dollarization?

Accepted Answer

A)   Dollarization causes a loss of sovereignty over domestic monetary policy.
B)   Dollarization removes currency volatility against the dollar.
C)   Dollarization causes the country to lose the power of seignorage.
D)   The central bank of the dollarized country loses the role of lender of last resort. B

Question 2

Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology.Under this system,countries with "fixed exchange rates" are considered to have:

Accepted Answer

A)   a residual agreement.
B)   soft pegs.
C)   hard pegs.
D)   floating arrangements. B

Question 3

The following are examples of degrees of internationalization of an international currency EXCEPT:

Accepted Answer

A)   First degree of internationalization is when an international currency becomes readily accessible for trade.
B)   A second degree of internationalization is when an international currency is used for international investment.
C)   A third degree of internationalization is when an international currency is used for international investment.
D)   A third degree of internationalization is when an international currency takes the role of a reserve currency. C

Question 4

Which of the following is NOT an attribute of the "ideal" currency?

Accepted Answer

A)   monetary independence
B)   full financial integration
C)   exchange rate stability
D)   All are attributes of an ideal currency.

Question 5

In January 2000 Ecuador officially replaced its national currency,the Ecuadorian sucre,with the U.S.dollar.This practice is known as:

Accepted Answer

A)   bi-currencyism.
B)   securitization
C)   a Yankee bailout.
D)   dollarization.

Question 6

According to the terminology associated with changes in currency values,depreciation is a case when a currency's value relative to other currencies is changed by a government.

Accepted Answer

A) True 
 B)False

Question 7

Explain how all exchange rate regimes must deal with the trade-off between rules and discretion,as well as between cooperation and independence.List and classified two International Monetary Systems based on these four quadrants.

Accepted Answer

The answer of Explain how all exchange rate regimes must...

Question 8

For the three years from early 2002 to early 2005,the euro maintained a strong and steady rise in value against the U.S.dollar (USD).After a brief respite in 2005,the euro continued its climb against the USD into 2008.Which of the following were NOT a contributing factor in the assent of the euro and the decline in the dollar?

Accepted Answer

A)   severe U.S. balance of payments deficits
B)   a general weakening of the dollar after the attacks of September 11, 2001
C)   large U.S. balance of payment surpluses
D)   All of the above were contributing factors.

Question 9

Beginning in 1991 Argentina conducted its monetary policy through a currency board.In January 2002,Argentina abandoned the currency board and allowed its currency to float against other currencies.The country took this step because:

Accepted Answer

A)   the Argentine Peso had grown too strong against major trading powers thus the currency board policies were hurting the domestic economy.
B)   the United States required the action as a prerequisite to finalizing a free trade zone with all of North, South, and Central America.
C)   the Argentine government lost the ability to maintain the pegged relationship as in fact investors and traders perceived a lack of equality between the Argentine Peso and the U.S. dollar.
D)   all of the above

Question 10

Although the contemporary international monetary system is typically referred to as a "floating regime," it is clearly not the case for the majority of the world's nations.

Accepted Answer

A) True 
 B)False

Question 11

List and explain the three attributes (often referred as the impossible trinity)an ideal currency would possess if existed in today's world.

Accepted Answer

The answer of List and explain the three attributes (often...

Question 12

Bretton Woods required less in the way of cooperation among countries than did the gold standard.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT a required convergence criteria to become a full member of the European Economic and Monetary Union (EMU)?

Accepted Answer

A)   National birthrates must be at 2.0 or lower per person.
B)   The fiscal deficit should be no more than 3% of GDP.
C)   Nominal inflation should be no more than 1.5% above the average inflation rate for the three members with the lowest inflation rates in the previous year.
D)   Government debt should be no more than 60% of GDP.

Question 14

Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods?

Accepted Answer

A)   widely divergent national monetary and fiscal policies among member nations
B)   differential rates of inflation across member nations
C)   several unexpected economic shocks to member nations
D)   all of the above

Question 15

Regime structures like the gold standard required no cooperative policies among countries,only the assurance that all would abide by the "rules of the game."

Accepted Answer

A) True 
 B)False

Question 16

Today,the United States has been ejected from the International Monetary Fund for refusal to pay annual dues.

Accepted Answer

A) True 
 B)False

Question 17

In January 2002,the Argentine Peso changed in value from Peso1.00/$ to Peso1.40/$,thus,the Argentine Peso ________ against the U.S.dollar.

Accepted Answer

A)   strengthened
B)   weakened
C)   remained neutral
D)   all of the above

Question 18

Based on the premise that,other things equal,countries would prefer a fixed exchange rate,which of the following statements is NOT true?

Accepted Answer

A)   Fixed rates provide stability in international prices for the conduct of trade.
B)   Fixed exchange rate regimes necessitate that central banks maintain large quantities of international reserves for use in the occasional defense of the fixed rate.
C)   Fixed rates are inherently inflationary in that they require the country to follow loose monetary and fiscal policies.
D)   Stable prices aid in the growth of international trade and lessen exchange rate risks for businesses.

Question 19

The International Monetary Fund (IMF):

Accepted Answer

A)   in recent years has provided large loans to Russia, South Korea, and Brazil.
B)   was created as a result of the Bretton Woods Agreement.
C)   aids countries with balance of payment and exchange rate problems.
D)   is all of the above.

Question 20

The members of the EU do have relative freedom to set their own fiscal policies- government spending,taxation,and the creation of government surpluses or deficits.They are expected to keep deficit spending within limits.

Accepted Answer

A) True 
 B)False

Exam 2: The International Monetary System

Which of the following is NOT an argument against dollarization?

Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology.Under this system,countries with "fixed exchange rates" are considered to have:

The following are examples of degrees of internationalization of an international currency EXCEPT:

Which of the following is NOT an attribute of the "ideal" currency?

In January 2000 Ecuador officially replaced its national currency,the Ecuadorian sucre,with the U.S.dollar.This practice is known as:

According to the terminology associated with changes in currency values,depreciation is a case when a currency's value relative to other currencies is changed by a government.

Explain how all exchange rate regimes must deal with the trade-off between rules and discretion,as well as between cooperation and independence.List and classified two International Monetary Systems based on these four quadrants.

Beginning in 1991 Argentina conducted its monetary policy through a currency board.In January 2002,Argentina abandoned the currency board and allowed its currency to float against other currencies.The country took this step because:

Although the contemporary international monetary system is typically referred to as a "floating regime," it is clearly not the case for the majority of the world's nations.

List and explain the three attributes (often referred as the impossible trinity)an ideal currency would possess if existed in today's world.

Bretton Woods required less in the way of cooperation among countries than did the gold standard.

Which of the following is NOT a required convergence criteria to become a full member of the European Economic and Monetary Union (EMU) ?

Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods?

Regime structures like the gold standard required no cooperative policies among countries,only the assurance that all would abide by the "rules of the game."

Today,the United States has been ejected from the International Monetary Fund for refusal to pay annual dues.

In January 2002,the Argentine Peso changed in value from Peso1.00/$ to Peso1.40/$,thus,the Argentine Peso ________ against the U.S.dollar.

Based on the premise that,other things equal,countries would prefer a fixed exchange rate,which of the following statements is NOT true?

The International Monetary Fund (IMF) :

The members of the EU do have relative freedom to set their own fiscal policies- government spending,taxation,and the creation of government surpluses or deficits.They are expected to keep deficit spending within limits.