Exam 15: Exchange Rate Systems and Currency Crises

Table 15.1. The Market for Francs -Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

Under managed-floating exchange rates,market forces are allowed to determine exchange rates in the short run while central bank intervention is used to stabilize exchange rates in the long run.

Table 15.1. The Market for Francs -Refer to Table 15.1.If monetary authorities fix the exchange rate at $0.10 per franc,there would be a:

For the United States,its current exchange rate system is generally considered to be a

If Uganda devalues its shilling by 10 percent and Burundi devalues its franc by 5 percent,the shilling's exchange value appreciates 10 percent against the franc.

In recent years,members of the International Monetary Fund have adopted exchange rate systems including

Small nations,such as Angola and Barbados,peg their currencies to the U.S.dollar since the prices of many of their traded goods are determined in markets in which the dollar is the key currency.

An objective of the dollarization of the Mexican economy would be to:

During the 1970s,the European Union,in its quest for monetary union,adopted what came to be referred to as the "Community Snake." This device was a:

If Ecuador adopts the U.S.dollar as its official currency,the country loses its seigniorage.

Under a system of fixed exchange rates,if the international reserves of a country's central bank become exhausted,it cannot keep its currency

Developing countries with more than one major trading partner often peg their currencies to a group or basket of those trading partner currencies.

Under a system of fixed exchange rates,if the exchange rate of a country is overvalued,then its central bank's effort to prevent the currency from ______ will lead to a (an) ______.

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

To temporarily offset a depreciation in the dollar's exchange value,the Federal Reserve could ____ the U.S.money supply which would promote a (an) ____ in U.S.interest rates and a (an) ____ in investment flows to the United States.

Figure 15.2 Market for the British Pound -Refer to Figure 15.2.Suppose the United States decreases investment spending in England.Under a floating exchange rate system,the new equilibrium exchange rate would be:

When pursued over the long run,a policy of increasing the domestic money supply to offset an appreciation of the home country's currency results in inflation and a decrease in home-country competitiveness in key industries.

Under managed floating exchange rates,central bank intervention is used to offset temporary fluctuations in exchange rates that contribute to uncertainty in carrying out transactions in international trade and finance.

Sources of a currency crisis often include weak financial systems and budget deficits financed by inflation.

A central bank that desires a (an) ______ of its currency would likely implement a ______ monetary policy.