Question 1

Why did the Bretton Woods system fail?

Accepted Answer

The Bretton Woods system started to fall...

Question 2

The Asian meltdown began in mid-1997 in Japan when it became clear that several key Japanese financial institutions were on the verge of default.

Accepted Answer

A) True 
 B)False

Question 3

When a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of a currency,a(n) _____ has occurred.

Accepted Answer

A)  foreign debt crisis
B)  banking crisis
C)  currency crisis
D)  exchange crisisE) A) and D)
F) A) and C)

Question 4

The IMF has been criticized because of all of the following reasons except:

Accepted Answer

A)  it has a "one-size-fits-all" approach to macroeconomic policy is inappropriate for many countries.
B)  its rescue efforts are exacerbating a problem known to economists as moral hazard.
C)  it has become too powerful for an institution that lacks any real mechanism for accountability.
D)  its lax macroeconomic policies in the Asian crisis were not well suited to countries suffering from a private sector debt crisis with deflationary undertones.E) A) and B)
F) B) and C)

Question 5

Discuss the arguments for a floating exchange rate system.

Accepted Answer

There are two main elements in the case ...

Question 6

When a country cannot service its foreign debt obligations,a banking crisis has occurred.

Accepted Answer

A) True 
 B)False

Question 7

When the income a country's residents earn from exports is equal to the money its residents pay to other countries for imports,the country is said to:

Accepted Answer

A)  be in current account equilibrium.
B)  be in capital account equilibrium.
C)  be in balance-of-trade equilibrium.
D)  have a managed float.E) All of the above
F) A) and B)

Question 8

What is a currency board? Why do countries choose this type of system? What are the disadvantages of this type of arrangement?

Accepted Answer

A country that introduces a currency boa...

Question 9

Under a strict currency board system,interest rates rise until investors eventually find holding the local currency attractive again.

Accepted Answer

A) True 
 B)False

Question 10

Describe how exchange rates have been since the collapse of the fixed exchange rate system in 1973.What factors account for the changes in exchange rates since that time?

Accepted Answer

Since 1973,exchange rates have become mu...

Question 11

Compare and contrast a pegged exchange system and a dirty float system of exchange rates.

Accepted Answer

A country following a pegged exchange ra...

Question 12

Discuss the notion of moral hazard.What is the relationship between moral hazard and the IMF?

Accepted Answer

Moral hazard arises when people behave r...

Question 13

The Plaza Accord,signed in 1985,suggested that it would be desirable for most major currencies to fall relative to the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 14

How does a floating exchange rate regime differ from a dirty float system? Why would a country choose a dirty float system over a free float?

Accepted Answer

In a floating exchange rate system,the f...

Question 15

Because of the long-term implications of volatile exchange rates,firms should:

Accepted Answer

A)  use the forward market because it is a perfect predictor of future exchange rates.
B)  get complete insurance coverage for exchange rates that might occur several years in the future.
C)  pursue strategies that reduce economic exposure.
D)  avoid transactions that involve foreign currencies.E) C) and D)
F) A) and D)

Question 16

In 1997,the currencies of several Asian nations including South Korea,Indonesia,and Thailand lost between 50 percent between 80 percent of the value against the U.S.dollar over the period of a few months.

Accepted Answer

A) True 
 B)False

Question 17

MNEs can hedge against currency fluctuations by dispersing production to different locations around the globe.

Accepted Answer

A) True 
 B)False

Question 18

IMF loan packages typically include conditions such as cuts in public spending,higher interest rates,and tight monetary policy.

Accepted Answer

A) True 
 B)False

Question 19

The Bretton Woods agreement differed from the gold standard in that it:

Accepted Answer

A)  incorporated both discipline and flexibility.
B)  was a floating rate system.
C)  was based on the British pound.
D)  was a rigid system of fixed exchange rates.E) A) and B)
F) All of the above

Question 20

Discuss the international monetary system.What are the major trading currencies?

Accepted Answer

The international monetary system refers...

Exam 10: The International Monetary System

In 1997,the currencies of several Asian nations including South Korea,Indonesia,and Thailand lost between 50 percent between 80 percent of the value against the U.S.dollar over the period of a few months.

Correct AnswerverifiedShow Answer

When a country cannot service its foreign debt obligations,a banking crisis has occurred.

Correct AnswerverifiedShow Answer

Describe how exchange rates have been since the collapse of the fixed exchange rate system in 1973.What factors account for the changes in exchange rates since that time?

Correct AnswerverifiedSince 1973,exchange rates have become mu...View AnswerShow Answer

When a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of a currency,a(n) _____ has occurred.

Correct AnswerverifiedShow Answer

What is a currency board? Why do countries choose this type of system? What are the disadvantages of this type of arrangement?

Correct AnswerverifiedA country that introduces a currency boa...View AnswerShow Answer

Under a strict currency board system,interest rates rise until investors eventually find holding the local currency attractive again.

Correct AnswerverifiedShow Answer

The Plaza Accord,signed in 1985,suggested that it would be desirable for most major currencies to fall relative to the U.S.dollar.

Correct AnswerverifiedShow Answer

Discuss the international monetary system.What are the major trading currencies?

Correct AnswerverifiedThe international monetary system refers...View AnswerShow Answer

How does a floating exchange rate regime differ from a dirty float system? Why would a country choose a dirty float system over a free float?

Correct AnswerverifiedIn a floating exchange rate system,the f...View AnswerShow Answer

Discuss the notion of moral hazard.What is the relationship between moral hazard and the IMF?

Correct AnswerverifiedMoral hazard arises when people behave r...View AnswerShow Answer

Compare and contrast a pegged exchange system and a dirty float system of exchange rates.

Correct AnswerverifiedA country following a pegged exchange ra...View AnswerShow Answer

Why did the Bretton Woods system fail?

Correct AnswerverifiedThe Bretton Woods system started to fall...View AnswerShow Answer

The Bretton Woods agreement differed from the gold standard in that it:

Correct AnswerverifiedShow Answer

The Asian meltdown began in mid-1997 in Japan when it became clear that several key Japanese financial institutions were on the verge of default.

Correct AnswerverifiedShow Answer

The IMF has been criticized because of all of the following reasons except:

Correct AnswerverifiedShow Answer

When the income a country's residents earn from exports is equal to the money its residents pay to other countries for imports,the country is said to:

Correct AnswerverifiedShow Answer

Discuss the arguments for a floating exchange rate system.

Correct AnswerverifiedThere are two main elements in the case ...View AnswerShow Answer

IMF loan packages typically include conditions such as cuts in public spending,higher interest rates,and tight monetary policy.

Correct AnswerverifiedShow Answer

MNEs can hedge against currency fluctuations by dispersing production to different locations around the globe.

Correct AnswerverifiedShow Answer

Because of the long-term implications of volatile exchange rates,firms should:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Since 1973,exchange rates have become mu...
View Answer

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Correct Answer
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A country that introduces a currency boa...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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The international monetary system refers...
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In a floating exchange rate system,the f...
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Moral hazard arises when people behave r...
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Correct Answer
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A country following a pegged exchange ra...
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Correct Answer
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The Bretton Woods system started to fall...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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There are two main elements in the case ...
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Correct Answer
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