Question 1

A currency union is a situation where one country pegs its currency to another country's currency.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements would be true if aggregate demand were increasing rapidly?

Accepted Answer

A)  The central bank would need to sell foreign exchange. 
B)  The central bank would need to buy foreign exchange. 
C)  The central bank would need to borrow money from the government. 
D)  The central bank would need to buy government bonds. 
E)  The central bank would not change policy. 
A)  The central bank would need to sell foreign exchange. 
B)  The central bank would need to buy foreign exchange. 
C)  The central bank would need to borrow money from the government. 
D)  The central bank would need to buy government bonds. 
E)  The central bank would not change policy.

Question 3

One problem associated with exchange controls is that the government must determine who gets the foreign exchange.

Accepted Answer

A) True 
 B)False

Question 4

With exchange controls it is possible for the nominal exchange rate to appreciate and for the real exchange rate to also appreciate.

Accepted Answer

A) True 
 B)False

Question 5

Which country uses the Euro as its national currency?

Accepted Answer

A)  France 
B)  Sweden 
C)  Denmark 
D)  the UK 
E)  Turkey 
A)  France 
B)  Sweden 
C)  Denmark 
D)  the UK 
E)  Turkey

Question 6

Governments using an exchange control system often limit flows of money for capital account transactions.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is the term used to describe the offsetting of the effects of intervention in the foreign exchange market on the money supply?

Accepted Answer

A)  daily intervention 
B)  sterilization 
C)  discretionary monetary policy 
D)  discretionary fiscal policy 
E)  currency board 
A)  daily intervention 
B)  sterilization 
C)  discretionary monetary policy 
D)  discretionary fiscal policy 
E)  currency board

Question 8

The benefits of a currency union associated with not having to exchange currencies is known as a:

Accepted Answer

A)  monetary efficiency gain. 
B)  currency board gains. 
C)  transparency gains. 
D)  n-sum game gains. 
E)  government efficiency gain 
A)  monetary efficiency gain. 
B)  currency board gains. 
C)  transparency gains. 
D)  n-sum game gains. 
E)  government efficiency gain

Question 9

Which country is a member of the EU and does not use the Euro as its national currency?

Accepted Answer

A)  Spain 
B)  Finland 
C)  Denmark 
D)  Ireland 
E)  Greece 
A)  Spain 
B)  Finland 
C)  Denmark 
D)  Ireland 
E)  Greece

Question 10

The selling of foreign exchange by the central bank has no effect on the domestic money supply.

Accepted Answer

A) True 
 B)False

Question 11

Exchange control systems are common among developing countries.

Accepted Answer

A) True 
 B)False

Question 12

A currency union is always better than having separate currencies.

Accepted Answer

A) True 
 B)False

Question 13

An inconvertible currency is one that cannot be freely traded for gold.

Accepted Answer

A) True 
 B)False

Question 14

It is possible to peg a currency with monetary policy if the country sacrifices internal balance considerations.

Accepted Answer

A) True 
 B)False

Question 15

Exchange controls:

Accepted Answer

A)  require the government to balance inflows and outflows of foreign exchange at the current exchange rate. 
B)  require the government to ensure that the foreign exchange market is perfectly competitive. 
C)  require the government to sell more foreign exchange than it buys. 
D)  require the government to stop buying foreign exchange. 
E)  Require the government to intervene in the foreign exchange market. 
A)  require the government to balance inflows and outflows of foreign exchange at the current exchange rate. 
B)  require the government to ensure that the foreign exchange market is perfectly competitive. 
C)  require the government to sell more foreign exchange than it buys. 
D)  require the government to stop buying foreign exchange. 
E)  Require the government to intervene in the foreign exchange market.

Question 16

If total inflows of foreign exchange exceed total outflows of foreign exchange at the current fixed exchange rate, the government would need to intervene and:

Accepted Answer

A)  buy foreign exchange to maintain the exchange rate. 
B)  sell foreign exchange to maintain the exchange rate. 
C)  devalue the country's currency. 
D)  conduct an expansionary monetary policy. 
E)  reduce trade flows. 
A)  buy foreign exchange to maintain the exchange rate. 
B)  sell foreign exchange to maintain the exchange rate. 
C)  devalue the country's currency. 
D)  conduct an expansionary monetary policy. 
E)  reduce trade flows.

Question 17

There will be no black market for U.S. dollars in a country where there are no restrictions on currency transactions.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following situations would be easiest for a central bank to deal with?

Accepted Answer

A)  External deficit and inflation 
B)  External deficit and high unemployment 
C)  External surplus and inflation 
D)  External balance and high inflation 
E)  external balance and low inflation. 
A)  External deficit and inflation 
B)  External deficit and high unemployment 
C)  External surplus and inflation 
D)  External balance and high inflation 
E)  external balance and low inflation.

Question 19

A crawling peg is a situation where a country maintains a fixed real exchange rate against another currency.

Accepted Answer

A) True 
 B)False

Question 20

As a government adopts a contractionary fiscal policy:

Accepted Answer

A)  the demand for loanable funds increases causing interest rates to rise. 
B)  the demand for loanable funds decreases causing interest rates to fall. 
C)  the supply of loanable funds increases causing interest rates to rise. 
D)  the supply of loanable funds decreases causing interest rates to fall. 
E)  the supply of loanable funds does not change and interest rates fall. 
A)  the demand for loanable funds increases causing interest rates to rise. 
B)  the demand for loanable funds decreases causing interest rates to fall. 
C)  the supply of loanable funds increases causing interest rates to rise. 
D)  the supply of loanable funds decreases causing interest rates to fall. 
E)  the supply of loanable funds does not change and interest rates fall.

A currency union is a situation where one country pegs its currency to another country's currency.

Which of the following statements would be true if aggregate demand were increasing rapidly?

One problem associated with exchange controls is that the government must determine who gets the foreign exchange.

With exchange controls it is possible for the nominal exchange rate to appreciate and for the real exchange rate to also appreciate.

Which country uses the Euro as its national currency?

Governments using an exchange control system often limit flows of money for capital account transactions.

Which of the following is the term used to describe the offsetting of the effects of intervention in the foreign exchange market on the money supply?

The benefits of a currency union associated with not having to exchange currencies is known as a:

Which country is a member of the EU and does not use the Euro as its national currency?

The selling of foreign exchange by the central bank has no effect on the domestic money supply.

Exchange control systems are common among developing countries.

A currency union is always better than having separate currencies.

An inconvertible currency is one that cannot be freely traded for gold.

It is possible to peg a currency with monetary policy if the country sacrifices internal balance considerations.

Exchange controls:

If total inflows of foreign exchange exceed total outflows of foreign exchange at the current fixed exchange rate, the government would need to intervene and:

There will be no black market for U.S. dollars in a country where there are no restrictions on currency transactions.

Which of the following situations would be easiest for a central bank to deal with?

A crawling peg is a situation where a country maintains a fixed real exchange rate against another currency.

As a government adopts a contractionary fiscal policy:

Introduction: An Overview of the World Economy

Why Countries Trade

Comparative Advantage and the Production Possibilities Frontier

Factor Endowments and the Commodity Composition of Trade

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Macroeconomic Policy and Floating Exchange Rates

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters

Exam 18: Fixed Exchange Rates and Currency Unions

A currency union is a situation where one country pegs its currency to another country's currency.

Which of the following statements would be true if aggregate demand were increasing rapidly?

One problem associated with exchange controls is that the government must determine who gets the foreign exchange.

With exchange controls it is possible for the nominal exchange rate to appreciate and for the real exchange rate to also appreciate.

Which country uses the Euro as its national currency?

Governments using an exchange control system often limit flows of money for capital account transactions.

Which of the following is the term used to describe the offsetting of the effects of intervention in the foreign exchange market on the money supply?

The benefits of a currency union associated with not having to exchange currencies is known as a:

Which country is a member of the EU and does not use the Euro as its national currency?

The selling of foreign exchange by the central bank has no effect on the domestic money supply.

Exchange control systems are common among developing countries.

A currency union is always better than having separate currencies.

An inconvertible currency is one that cannot be freely traded for gold.

It is possible to peg a currency with monetary policy if the country sacrifices internal balance considerations.

Exchange controls:

If total inflows of foreign exchange exceed total outflows of foreign exchange at the current fixed exchange rate, the government would need to intervene and:

There will be no black market for U.S. dollars in a country where there are no restrictions on currency transactions.

Which of the following situations would be easiest for a central bank to deal with?

A crawling peg is a situation where a country maintains a fixed real exchange rate against another currency.

As a government adopts a contractionary fiscal policy:

Introduction: An Overview of the World Economy

Why Countries Trade

Comparative Advantage and the Production Possibilities Frontier

Factor Endowments and the Commodity Composition of Trade

Intra-Industry Trade

The Firm in the World Economy

International Factor Movements

Tariffs

Nontariff Distortions to Trade

International Trade Policy

Regional Economic Arrangements

International Trade and Economic Growth

National Income Accounting and the Balance of Payments

Exchange Rates and Their Determination: A Basic Model

Money, Interest Rates, and the Exchange Rate

Open Economy Macroeconomics

Macroeconomic Policy and Floating Exchange Rates

International Monetary Arrangements

Capital Flows and the Developing Countries

Filters