Question 1

Under a system of managed floating exchange rates,central banks intervene in the foreign exchange market to

Accepted Answer

A)  moderate long run movements in exchange rates 
B)  reinforce long run movements in exchange rates 
C)  moderate short run fluctuations in exchange rates 
D)  reinforced short run fluctuations in exchange rates 
A)  moderate long run movements in exchange rates 
B)  reinforce long run movements in exchange rates 
C)  moderate short run fluctuations in exchange rates 
D)  reinforced short run fluctuations in exchange rates C

Question 2

If Uganda sets its par value at 400 shillings per SDR and Burundi sets its par value at 200 francs per SDR,the official exchange rate is 1 franc = o.5 shillings.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is a hybrid exchange rate system that contains elements of both fixed exchange rates and floating exchange rates?

Accepted Answer

A)  adjustable pegged exchange rates 
B)  managed floating exchange rates 
C)  crawling pegged exchange rates 
D)  all of the above 
A)  adjustable pegged exchange rates 
B)  managed floating exchange rates 
C)  crawling pegged exchange rates 
D)  all of the above D

Question 4

For Ecuador,an advantage of adopting the dollar as its official currency is that

Accepted Answer

A)  the Federal Reserve becomes Ecuador's lender of last resort 
B)  Ecuador escapes the likelihood of a speculative attack 
C)  Ecuador's government can capture revenue by issuing currency (called seigniorage) 
D)  Eduador's monetary policy becomes independent from that of the Federal Reserve 
A)  the Federal Reserve becomes Ecuador's lender of last resort 
B)  Ecuador escapes the likelihood of a speculative attack 
C)  Ecuador's government can capture revenue by issuing currency (called seigniorage) 
D)  Eduador's monetary policy becomes independent from that of the Federal Reserve

Question 5

Which of the following is not a potential disadvantage of freely floating exchange rates?

Accepted Answer

A)  They require larger amounts of international reserves than other exchange systems 
B)  Demand schedules for imports and exports may be price speculation 
C)  There may occur large amounts of destabilizing speculation 
D)  Capital movements among nations may be hindered via exchange rate fluctuations 
A)  They require larger amounts of international reserves than other exchange systems 
B)  Demand schedules for imports and exports may be price speculation 
C)  There may occur large amounts of destabilizing speculation 
D)  Capital movements among nations may be hindered via exchange rate fluctuations

Question 6

As a policy instrument,currency devaluation may be controversial since it:

Accepted Answer

A)  Imposes hardships on the exporters of foreign countries 
B)  Imposes hardships on exporters of the devaluing country 
C)  Is generally followed by unemployment in the devaluing country 
D)  Is generally followed by price deflation in the devaluing country 
A)  Imposes hardships on the exporters of foreign countries 
B)  Imposes hardships on exporters of the devaluing country 
C)  Is generally followed by unemployment in the devaluing country 
D)  Is generally followed by price deflation in the devaluing country

Question 7

An argument can be made for controls on the inflow of capital for developing countries because capital inflows can lead to a lending boom,speculation,and excessive risk taking.

Accepted Answer

A) True 
 B)False

Question 8

The result of devaluations of the dollar in the early 1970s was to

Accepted Answer

A)  increase the price of U.S.exports 
B)  decrease the price of U.S.exports 
C)  decrease the price of U.S.imports 
D)  increase the U.S.balance of payments surplus 
A)  increase the price of U.S.exports 
B)  decrease the price of U.S.exports 
C)  decrease the price of U.S.imports 
D)  increase the U.S.balance of payments surplus

Question 9

To keep the yen's exchange value from appreciating against the dollar,Japan's exchange stabilization fund would buy yen for dollars on the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 10

With fixed exchange rates,assume that the home currency becomes undervalued,that is,above its par value.To maintain the fixed exchange rate,the home country's central bank must

Accepted Answer

A)  sell the home currency and purchasing foreign currencies 
B)  sell the home currency and sell foreign currencies 
C)  purchase the home currency and sell foreign currencies 
D)  purchase the home currency and purchase foreign currencies 
A)  sell the home currency and purchasing foreign currencies 
B)  sell the home currency and sell foreign currencies 
C)  purchase the home currency and sell foreign currencies 
D)  purchase the home currency and purchase foreign currencies

Question 11

What is an SDR?

Accepted Answer

The SDR is a currency basket composed of

Question 12

Figure 15.1 shows the market for the Swiss franc.In the figure,the initial demand for marks and supply of marks are depicted by D0 and S0 respectively.
Figure 15.1.The Market for the Swiss Franc
  
-Refer to Figure 15.1.With a system of floating exchange rates,the equilibrium exchange rate is:

Accepted Answer

A)  $0.40 per franc 
B)  $0.50 per franc 
C)  $0.60 per franc 
D)  $0.70 per franc 
A)  $0.40 per franc 
B)  $0.50 per franc 
C)  $0.60 per franc 
D)  $0.70 per franc

Question 13

Under managed floating exchange rates,the Federal Reserve could offset an appreciation of the dollar against the yen by:

Accepted Answer

A)  Increasing the money supply which promotes falling interest rates and net investment outflows 
B)  Increasing the money supply which promotes rising interest rates and net investment inflows 
C)  Decreasing the money supply which promotes falling interest rates and net investment outflows 
D)  Decreasing the money supply which promotes rising interest rates and net investment inflows 
A)  Increasing the money supply which promotes falling interest rates and net investment outflows 
B)  Increasing the money supply which promotes rising interest rates and net investment inflows 
C)  Decreasing the money supply which promotes falling interest rates and net investment outflows 
D)  Decreasing the money supply which promotes rising interest rates and net investment inflows

Question 14

The par values of most developing-country currencies are currently defined in terms of gold.

Accepted Answer

A) True 
 B)False

Question 15

A "key currency" is one that is widely traded on world money markets,has demonstrated relative stable values over time,and has widely been accepted as a means of international settlement.

Accepted Answer

A) True 
 B)False

Question 16

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

Accepted Answer

A) True 
 B)False

Question 17

Most developing countries have chosen to allow their currencies to float independently in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 18

According to the Bretton Woods System of 1944-1973,the United States was designated as the

Accepted Answer

A)  par value country 
B)  floating exchange rate country 
C)  reserve currency country 
D)  liquidity deficit country 
A)  par value country 
B)  floating exchange rate country 
C)  reserve currency country 
D)  liquidity deficit country

Question 19

Under the gold standard,the official exchange rate would be $2.80 per pound as long as the United States bought and sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce.

Accepted Answer

A) True 
 B)False

Question 20

A main purpose of exchange stabilization funds is to:

Accepted Answer

A)  Permit a country to overvalue its currency in the exchange markets 
B)  Permit a country to undervalue its currency in the exchange markets 
C)  Increase the supply of foreign currency when imports exceed exports 
D)  Decrease the supply of foreign currency when imports exceed exports 
A)  Permit a country to overvalue its currency in the exchange markets 
B)  Permit a country to undervalue its currency in the exchange markets 
C)  Increase the supply of foreign currency when imports exceed exports 
D)  Decrease the supply of foreign currency when imports exceed exports

Under a system of managed floating exchange rates,central banks intervene in the foreign exchange market to

If Uganda sets its par value at 400 shillings per SDR and Burundi sets its par value at 200 francs per SDR,the official exchange rate is 1 franc = o.5 shillings.

Which of the following is a hybrid exchange rate system that contains elements of both fixed exchange rates and floating exchange rates?

For Ecuador,an advantage of adopting the dollar as its official currency is that

Which of the following is not a potential disadvantage of freely floating exchange rates?

As a policy instrument,currency devaluation may be controversial since it:

An argument can be made for controls on the inflow of capital for developing countries because capital inflows can lead to a lending boom,speculation,and excessive risk taking.

The result of devaluations of the dollar in the early 1970s was to

To keep the yen's exchange value from appreciating against the dollar,Japan's exchange stabilization fund would buy yen for dollars on the foreign exchange market.

With fixed exchange rates,assume that the home currency becomes undervalued,that is,above its par value.To maintain the fixed exchange rate,the home country's central bank must

What is an SDR?

Figure 15.1 shows the market for the Swiss franc.In the figure,the initial demand for marks and supply of marks are depicted by D0 and S0 respectively. Figure 15.1.The Market for the Swiss Franc -Refer to Figure 15.1.With a system of floating exchange rates,the equilibrium exchange rate is:

Under managed floating exchange rates,the Federal Reserve could offset an appreciation of the dollar against the yen by:

The par values of most developing-country currencies are currently defined in terms of gold.

A "key currency" is one that is widely traded on world money markets,has demonstrated relative stable values over time,and has widely been accepted as a means of international settlement.

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

Most developing countries have chosen to allow their currencies to float independently in the foreign exchange market.

According to the Bretton Woods System of 1944-1973,the United States was designated as the

Under the gold standard,the official exchange rate would be $2.80 per pound as long as the United States bought and sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce.

A main purpose of exchange stabilization funds is to:

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance-of-payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance-of-payments

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

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Exam 15: Exchange Rate Systems and Currency Crises

Under a system of managed floating exchange rates,central banks intervene in the foreign exchange market to

If Uganda sets its par value at 400 shillings per SDR and Burundi sets its par value at 200 francs per SDR,the official exchange rate is 1 franc = o.5 shillings.

Which of the following is a hybrid exchange rate system that contains elements of both fixed exchange rates and floating exchange rates?

For Ecuador,an advantage of adopting the dollar as its official currency is that

Which of the following is not a potential disadvantage of freely floating exchange rates?

As a policy instrument,currency devaluation may be controversial since it:

An argument can be made for controls on the inflow of capital for developing countries because capital inflows can lead to a lending boom,speculation,and excessive risk taking.

The result of devaluations of the dollar in the early 1970s was to

To keep the yen's exchange value from appreciating against the dollar,Japan's exchange stabilization fund would buy yen for dollars on the foreign exchange market.

With fixed exchange rates,assume that the home currency becomes undervalued,that is,above its par value.To maintain the fixed exchange rate,the home country's central bank must

What is an SDR?

Figure 15.1 shows the market for the Swiss franc.In the figure,the initial demand for marks and supply of marks are depicted by D0 and S0 respectively. Figure 15.1.The Market for the Swiss Franc -Refer to Figure 15.1.With a system of floating exchange rates,the equilibrium exchange rate is:

Under managed floating exchange rates,the Federal Reserve could offset an appreciation of the dollar against the yen by:

The par values of most developing-country currencies are currently defined in terms of gold.

A "key currency" is one that is widely traded on world money markets,has demonstrated relative stable values over time,and has widely been accepted as a means of international settlement.

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

Most developing countries have chosen to allow their currencies to float independently in the foreign exchange market.

According to the Bretton Woods System of 1944-1973,the United States was designated as the

Under the gold standard,the official exchange rate would be $2.80 per pound as long as the United States bought and sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce.

A main purpose of exchange stabilization funds is to:

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance-of-payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance-of-payments

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

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