Question 1

According to the Bretton Woods agreement,if a currency became too weak to defend,a devaluation of up to 10 percent would be allowed without any formal approval by the International Monetary Fund.

Accepted Answer

A) True 
 B)False

Question 2

Elaborate on the main criticisms of the International Monetary Fund's approach to financial crises.

Accepted Answer

One criticism is that the International ...

Question 3

Which of the following was the initial mission of the World Bank?

Accepted Answer

A)  maintaining order in the international monetary system
B)  financing the building of Europe's economy by providing low-interest loans
C)  taking over as the successor to the International Monetary Fund
D)  reviving the gold standard system
E)  enforcement of the floating exchange rate systemF) A) and B)
G) None of the above

Question 4

What was the drawback of the Bretton Woods system?

Accepted Answer

The Bretton Woods system had an Achilles...

Question 5

Which of the following was an announcement made by U.S.President Nixon to enable the devaluation of the dollar during the increase in inflation in 1971 in the United States?

Accepted Answer

A)  The IMF member countries would adopt the gold standard to fix exchange rates.
B)  The United States would no longer support the World Bank.
C)  A new 15 percent tax would be charged on U.S.exports.
D)  The dollar would no longer be convertible into gold.
E)  German deutsche marks would be the new reference currency.F) A) and D)
G) B) and D)

Question 6

What was the effect of the Marshall Plan?

Accepted Answer

A)  The United States lent money directly to European nations to help them rebuild their economies.
B)  Member countries of the International Monetary Fund were free to engage in competitive currency devaluations.
C)  The World Bank lent funds to reconstruct the war-torn economies of Europe.
D)  The United States lent money to third-world nations to support their public-sector projects.
E)  The World Bank lent money to the International Monetary Fund so that it could finance deficit-laden countries.F) All of the above
G) A) and D)

Question 7

Which of the following is a great strength of the gold standard?

Accepted Answer

A)  It helped establish the dollar as a predominant vehicle currency.
B)  It helped governments raise foreign exchange reserves thereby increasing economic stability.
C)  It contained a powerful mechanism for achieving balance-of-trade equilibrium by all countries.
D)  It helped reduce inflation to near-zero levels in all countries engaged in international trade.
E)  It helped to establish a common currency across the globe to fund international trade.F) B) and E)
G) None of the above

Question 8

What is the effect of a monetary contraction in a fixed exchange rate system?

Accepted Answer

A)  It forecasts low interest rates.
B)  It increases the demand for money.
C)  It puts downward pressure on a fixed exchange rate.
D)  It leads to an inflow of money from abroad.
E)  It can lead to high price inflation.F) B) and C)
G) B) and E)

Question 9

Which term was not defined in the International Monetary Fund's Articles of Agreement but was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Accepted Answer

A)  competitive disadvantage
B)  capital flight
C)  fundamental disequilibrium
D)  break-even point
E)  diseconomies of scaleF) B) and C)
G) A) and B)

Question 10

Which of the following refers to the institutional arrangements that govern exchange rates?

Accepted Answer

A)  generally accepted accounting principles
B)  general agreement on tariffs and trade
C)  international monetary system
D)  general agreement on trade in services
E)  financial management information systemF) A) and D)
G) A) and B)

Question 11

The country of Ninook wants to adopt a floating exchange rate system.Which of the following is an argument that Ninook can use to make a case for a floating exchange rate system?

Accepted Answer

A)  Each country should be allowed to choose its own inflation rate.
B)  Speculation in exchange rates dampens the growth of international trade and investment.
C)  Unpredictability of exchange rate movements makes business planning difficult.
D)  Removal of the obligation to maintain exchange rate parity destroys a government's monetary control.
E)  Trade deficits can be determined by the balance between savings and investment in a country,not by the external value of its currency.F) D) and E)
G) A) and E)

Question 12

Describe the Jamaica agreement of 1976.What were the main elements of this agreement?

Accepted Answer

The floating exchange rate regime that f...

Question 13

In terms of the gold standard,the amount of currency needed to purchase one ounce of gold was referred to as the

Accepted Answer

A)  gold to bond ratio.
B)  gold reserve ratio.
C)  gold mix ratio.
D)  gold par value.
E)  gold net value.F) A) and B)
G) A) and C)

Question 14

The rise in the value of the dollar between 1980 and 1985 occurred when the United States was running a large and growing trade deficit.Explain the factors that led to this rise.

Accepted Answer

The rise in the value of the dollar betw...

Question 15

The collapse of the fixed exchange rate system has been traced to the

Accepted Answer

A)  U.S.macroeconomic policy package of 1965-1968.
B)  inflexibility of the fixed exchange rate system that led to high unemployment.
C)  Marshall Plan,under which the United States lent money heavily to European nations.
D)  failure of the International Monetary Fund to impose monetary discipline.
E)  increased taxes in the United States to finance its welfare programs.F) B) and E)
G) B) and C)

Question 16

The International Monetary Fund has been criticized for

Accepted Answer

A)  its lack of a "one-size-fits-all" approach to macroeconomic policy.
B)  encouraging moral hazard among banks.
C)  its lack of power and authority.
D)  using external experts to gain knowledge about a country.
E)  keeping its operations open to outside scrutiny.F) B) and C)
G) A) and E)

Question 17

One of the reasons for the rapid rise in the value of the dollar between 1980 and 1985 despite a large trade deficit is due to

Accepted Answer

A)  political stability in all other parts of the world.
B)  heavy capital outflows from the United States.
C)  low real interest rates in the United States.
D)  slow economic growth in the developed countries of Europe.
E)  increasing exports against decreasing imports in the United States.F) C) and D)
G) B) and C)

Question 18

Describe the gold standard and a balance-of-trade equilibrium.

Accepted Answer

Pegging currencies to gold and guarantee...

Question 19

Moora and Trun,two countries that are part of the BURPHA common market have an exchange rate system where the values of their currencies are set against each other at a mutually agreed on exchange rate.Moora and Trun's exchange rate system is called

Accepted Answer

A)  clean float.
B)  floating.
C)  fixed.
D)  dirty-float.
E)  pegged.F) B) and D)
G) A) and B)

Question 20

Under the Plaza Accord of 1985,the Group of Five major industrial countries concluded that it would be desirable if

Accepted Answer

A)  the countries returned to a system of fixed exchange rates.
B)  the participating members reverted to the gold standard.
C)  the United States adopted protectionism to improve its trade balance.
D)  most major currencies appreciated vis-à-vis the U.S.dollar.
E)  governments did not regulate the buying and selling of currency.F) A) and C)
G) B) and D)

Exam 11: The International Monetary System

Which term was not defined in the International Monetary Fund's Articles of Agreement but was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?

Correct AnswerverifiedShow Answer

The rise in the value of the dollar between 1980 and 1985 occurred when the United States was running a large and growing trade deficit.Explain the factors that led to this rise.

Correct AnswerverifiedThe rise in the value of the dollar betw...View AnswerShow Answer

One of the reasons for the rapid rise in the value of the dollar between 1980 and 1985 despite a large trade deficit is due to

Correct AnswerverifiedShow Answer

Describe the Jamaica agreement of 1976.What were the main elements of this agreement?

Correct AnswerverifiedThe floating exchange rate regime that f...View AnswerShow Answer

Under the Plaza Accord of 1985,the Group of Five major industrial countries concluded that it would be desirable if

Correct AnswerverifiedShow Answer

Which of the following was an announcement made by U.S.President Nixon to enable the devaluation of the dollar during the increase in inflation in 1971 in the United States?

Correct AnswerverifiedShow Answer

What was the effect of the Marshall Plan?

Correct AnswerverifiedShow Answer

Moora and Trun,two countries that are part of the BURPHA common market have an exchange rate system where the values of their currencies are set against each other at a mutually agreed on exchange rate.Moora and Trun's exchange rate system is called

Correct AnswerverifiedShow Answer

The country of Ninook wants to adopt a floating exchange rate system.Which of the following is an argument that Ninook can use to make a case for a floating exchange rate system?

Correct AnswerverifiedShow Answer

In terms of the gold standard,the amount of currency needed to purchase one ounce of gold was referred to as the

Correct AnswerverifiedShow Answer

Describe the gold standard and a balance-of-trade equilibrium.

Correct AnswerverifiedPegging currencies to gold and guarantee...View AnswerShow Answer

Elaborate on the main criticisms of the International Monetary Fund's approach to financial crises.

Correct AnswerverifiedOne criticism is that the International ...View AnswerShow Answer

Which of the following was the initial mission of the World Bank?

Correct AnswerverifiedShow Answer

The collapse of the fixed exchange rate system has been traced to the

Correct AnswerverifiedShow Answer

The International Monetary Fund has been criticized for

Correct AnswerverifiedShow Answer

According to the Bretton Woods agreement,if a currency became too weak to defend,a devaluation of up to 10 percent would be allowed without any formal approval by the International Monetary Fund.

Correct AnswerverifiedShow Answer

Which of the following is a great strength of the gold standard?

Correct AnswerverifiedShow Answer

What was the drawback of the Bretton Woods system?

Correct AnswerverifiedThe Bretton Woods system had an Achilles...View AnswerShow Answer

What is the effect of a monetary contraction in a fixed exchange rate system?

Correct AnswerverifiedShow Answer

Which of the following refers to the institutional arrangements that govern exchange rates?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The rise in the value of the dollar betw...
View Answer

Correct Answer
verified

Correct Answer
verified
The floating exchange rate regime that f...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Pegging currencies to gold and guarantee...
View Answer

Correct Answer
verified
One criticism is that the International ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Bretton Woods system had an Achilles...
View Answer

Correct Answer
verified

Correct Answer
verified