Question 1

Since 1973,exchange rates have been relatively stable thanks to the floating exchange rate system currently in place.

Accepted Answer

A) True 
 B)False

Question 2

One criticism of the IMF's policy prescriptions is that its "one-size-fits-all" approach to microeconomic policy is inappropriate for many countries.

Accepted Answer

A) True 
 B)False

Question 3

When a country commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate,the country has adopted a _____ system of exchange rates.

Accepted Answer

A)  pegged
B)  floating
C)  currency board
D)  fixedE) C) and D)
F) All of the above

Question 4

Under a pegged exchange rate regime,a country will peg the value of its currency to _____ so that its own currency rises too.

Accepted Answer

A)  its domestic inflation rate
B)  that of a major currency
C)  its interest rates
D)  its foreign exchange reservesE) A) and B)
F) A) and D)

Question 5

In 1976,the _____ formalized the floating exchange rate system that followed the collapse of fixed exchange rate system.

Accepted Answer

A)  gold standard
B)  Plaza Accord
C)  Jamaica Agreement
D)  Louvre AccordE) B) and C)
F) C) and D)

Question 6

Under a strict currency board system,interest rates:

Accepted Answer

A)  adjust automatically.
B)  are constant.
C)  decline consistently.
D)  rarely move.E) None of the above
F) B) and C)

Question 7

Speculative buying and selling of currencies can create very volatile movements in exchange rates.

Accepted Answer

A) True 
 B)False

Question 8

If a country tries to hold the value of its currency within some range against an important reference currency,the country has a dirty float system.

Accepted Answer

A) True 
 B)False

Question 9

With the exception of Great Britain,most of the world's major trading nations,including the United States,Germany,and Japan had adopted the gold standard by 1880.

Accepted Answer

A) True 
 B)False

Question 10

A _____ means the value of the currency is fixed relative to a reference currency.

Accepted Answer

A)  pegged exchange rate
B)  dynamic exchange rate
C)  floating exchange rate
D)  fixed exchange rateE) A) and B)
F) A) and C)

Question 11

_____ arises when people behave recklessly because they know they will be saved if things go wrong.

Accepted Answer

A)  A debt situation
B)  Moral hazard
C)  A conflict of interest
D)  Policy failureE) A) and B)
F) All of the above

Question 12

High relative price inflation,a widening current account deficit,excessive expansion of domestic borrowing,and asset price inflation are all underlying causes of banking or foreign debt crises.

Accepted Answer

A) True 
 B)False

Question 13

A managed-float system is also known as a:

Accepted Answer

A)  fixed exchange rate system.
B)  floating exchange rate system.
C)  pegged exchange rate system.
D)  dirty-float exchange rate system.E) All of the above
F) A) and D)

Question 14

Compare and contrast currency crises,banking crises,and foreign debt crises.

Accepted Answer

A currency crisis occurs when a speculat...

Question 15

The main elements of the 1976 Jamaica agreement include all of the following except:

Accepted Answer

A)  floating rates were declared unacceptable.
B)  gold was abandoned as a reserve asset.
C)  total annual IMF quotas were increased to $41 billion.
D)  IMF members were permitted to sell their own gold reserves at the market price.E) A) and B)
F) A) and C)

Question 16

In a _____ exchange rate system,the value of a set of currencies is fixed against each other at some mutually agreed on exchange rate.

Accepted Answer

A)  pegged
B)  dirty
C)  fixed
D)  directE) A) and C)
F) A) and B) C

Question 17

A pure free float is one in which exchange rates are determined by market forces.

Accepted Answer

A) True 
 B)False

Question 18

The strength of the Bretton Woods system was that it could work even if its key currency,the U.S.dollar,was under speculative attack.

Accepted Answer

A) True 
 B)False  False

Question 19

The institutional arrangements that govern exchange rates are referred to as the international monetary system.

Accepted Answer

A) True 
 B)False

Question 20

An MNE can build strategic flexibility and reduce economic exposure by contracting out manufacturing.

Accepted Answer

A) True 
 B)False  True

Exam 10: The International Monetary System

Since 1973,exchange rates have been relatively stable thanks to the floating exchange rate system currently in place.

Correct AnswerverifiedShow Answer

One criticism of the IMF's policy prescriptions is that its "one-size-fits-all" approach to microeconomic policy is inappropriate for many countries.

Correct AnswerverifiedShow Answer

When a country commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate,the country has adopted a _____ system of exchange rates.

Correct AnswerverifiedShow Answer

Under a pegged exchange rate regime,a country will peg the value of its currency to _____ so that its own currency rises too.

Correct AnswerverifiedShow Answer

In 1976,the _____ formalized the floating exchange rate system that followed the collapse of fixed exchange rate system.

Correct AnswerverifiedShow Answer

Under a strict currency board system,interest rates:

Correct AnswerverifiedShow Answer

Speculative buying and selling of currencies can create very volatile movements in exchange rates.

Correct AnswerverifiedShow Answer

If a country tries to hold the value of its currency within some range against an important reference currency,the country has a dirty float system.

Correct AnswerverifiedShow Answer

With the exception of Great Britain,most of the world's major trading nations,including the United States,Germany,and Japan had adopted the gold standard by 1880.

Correct AnswerverifiedShow Answer

A _____ means the value of the currency is fixed relative to a reference currency.

Correct AnswerverifiedShow Answer

_____ arises when people behave recklessly because they know they will be saved if things go wrong.

Correct AnswerverifiedShow Answer

High relative price inflation,a widening current account deficit,excessive expansion of domestic borrowing,and asset price inflation are all underlying causes of banking or foreign debt crises.

Correct AnswerverifiedShow Answer

A managed-float system is also known as a:

Correct AnswerverifiedShow Answer

Compare and contrast currency crises,banking crises,and foreign debt crises.

Correct AnswerverifiedA currency crisis occurs when a speculat...View AnswerShow Answer

The main elements of the 1976 Jamaica agreement include all of the following except:

Correct AnswerverifiedShow Answer

In a _____ exchange rate system,the value of a set of currencies is fixed against each other at some mutually agreed on exchange rate.

Correct AnswerverifiedC

A pure free float is one in which exchange rates are determined by market forces.

Correct AnswerverifiedShow Answer

The strength of the Bretton Woods system was that it could work even if its key currency,the U.S.dollar,was under speculative attack.

Correct AnswerverifiedFalse

The institutional arrangements that govern exchange rates are referred to as the international monetary system.

Correct AnswerverifiedShow Answer

An MNE can build strategic flexibility and reduce economic exposure by contracting out manufacturing.

Correct AnswerverifiedTrue

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A currency crisis occurs when a speculat...
View Answer

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C

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False

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True