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The IMF's system of adjustable parities,under the auspices of the Bretton Woods agreement,allowed for the devaluation of a country's currency of up to _______________ if the IMF agreed that the country's balance of payments is in fundamental disequilibrium.


A) 10%
B) 15%
C) 20%
D) 25%
E) 30%

F) A) and B)
G) A) and C)

Correct Answer

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The great strength claimed for the gold standard was that it contained a powerful mechanism for simultaneously achieving a(n) _______________ for all countries.


A) balance-of-trade equilibrium
B) economic stability
C) interest rate parity
D) equal tariff levels
E) currency convertibility

F) B) and D)
G) C) and E)

Correct Answer

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The frequency of government interventions in the foreign exchange markets explains why the current system is often referred to as a managed-float system or a(n) ______________.


A) functional float system
B) statutory float system
C) dirty float system
D) unwieldy float system
E) controlled float system

F) C) and D)
G) A) and C)

Correct Answer

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Monetary discipline was a central objective of Bretton Woods,and a rigid policy of fixed exchange rates was _______________.


A) put into force
B) seen as too inflexible
C) tied to gold
D) tied to inflation
E) tied to monetary supply

F) B) and E)
G) C) and E)

Correct Answer

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Fixed exchange rates are seen as a mechanism for achieving the following two objectives


A) controlling inflation and economic discipline.
B) controlling unemployment and political discipline.
C) controlling economic stability and increasing gross national product.
D) controlling political stability and economic discipline.
E) controlling currency speculation and trade imbalances.

F) B) and E)
G) B) and C)

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The Bretton Woods system had an Achilles' heel: The system could not work if its key currency,the U.S.dollar,was what?


A) overvalued
B) undervalued
C) under speculative attack
D) subject to a high U.S. inflation rate
E) not based on the gold standard

F) A) and C)
G) C) and D)

Correct Answer

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The Bretton Woods agreement had an Achilles' heel: the system could not work if its key currency,the British pound,was under speculative attack.

A) True
B) False

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Although monetary discipline was a central objective of the Bretton Woods agreement,it was recognized that a _______________ of fixed exchange rates would be too inflexible.


A) relaxed policy
B) rigid policy
C) lending policy
D) balanced policy
E) managed policy

F) All of the above
G) C) and E)

Correct Answer

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A country that introduces a(n) ______________ commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.


A) currency board
B) monetary review commission
C) exchange rate review commission
D) certificate board
E) IMF pegged rate regime

F) A) and B)
G) B) and D)

Correct Answer

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Most economists trace the break-up of the fixed exchange rate system to the U.S.macroeconomic policy package of 1965-1968.

A) True
B) False

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The Oil crisis of 1979 is one reason for the volatility of exchange rates since March of 1973.

A) True
B) False

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The acronym IMF stands for:


A) International Monopoly Function
B) Interval Monetary Fluctuations
C) Interagency Monetary Function
D) International Monetary Fund
E) International Monetary Formation

F) C) and D)
G) B) and E)

Correct Answer

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Most economists trace the break-up of the fixed exchange rate system to ____________.


A) the U.S. macroeconomic policy package of 1965-1968
B) a worldwide recession
C) Japanese economic policy in the mid 1970s
D) European economic policy in the 1960s and 1970s
E) Japanese and German trade surpluses with the U.S.

F) A) and B)
G) All of the above

Correct Answer

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The Bretton Woods system of fixed exchange rates ________________.


A) has continued to be in force since it was adopted
B) collapsed in 1973
C) collapsed shortly after it was adopted
D) collapsed shortly after it was adopted, but has been reinstated and is in effect today
E) collapsed because of the Jamaica Agreement

F) A) and E)
G) B) and E)

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The gold standard is the practice of pegging currencies to gold and guaranteeing convertibility.

A) True
B) False

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A(n) ______________ is a governing body that manages the value of a currency by holding foreign currency reserves equal to the amount of domestic currency issued at a fixed exchange rate.


A) exchange rate committee
B) currency board
C) certificate board
D) monetary review commission
E) national bank currency committee

F) A) and C)
G) B) and D)

Correct Answer

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What is the difference between a free floating exchange rate and a managed or dirty float system?

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In a free floating system ther...

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The case for fixed exchange rates rests on arguments about monetary discipline,speculation,the lack of connection between the trade balance and exchange rates,and _______________.


A) automatic trade balance adjustments
B) uncertainty
C) the impracticality of the gold standard
D) monetary policy autonomy
E) the importance of the U.S. dollar

F) A) and C)
G) A) and B)

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In the context of the global monetary system,the IBRD stands for the _______________.


A) International Bank for Rents and Deposits
B) International Bureau for Restraining Devaluations
C) International Bank for Reconstruction and Development
D) International Bureau for Research and Development
E) International Bank Depository for Reconciliation of Deposits

F) B) and E)
G) A) and B)

Correct Answer

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Under the Bretton Woods system,if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy,the IMF would agree to a(n) ____________.


A) currency devaluation
B) increase in employment
C) increase in output
D) increase in interest rates
E) increased tariffs

F) B) and D)
G) D) and E)

Correct Answer

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