Question 1

Flexible exchange rates:

Accepted Answer

A)  enhance the effectiveness of fiscal policy 
B)  reduce the effectiveness of fiscal policy 
C)  enhance the effectiveness of monetary policy 
D)  reduce the effectiveness of monetary policy 
A)  enhance the effectiveness of fiscal policy 
B)  reduce the effectiveness of fiscal policy 
C)  enhance the effectiveness of monetary policy 
D)  reduce the effectiveness of monetary policy C

Question 2

Why is a flexible exchange rate system likely to be more efficient that a fixed exchange rate system?

Accepted Answer

It relies on exchange rate adjustments,as opposed to internal price adjustments,to bring about balance of payments adjustments; it makes the adjustment process smooth and continuous; it clearly identifies competitive advantages for commodities across countries.

Question 3

Which of the following exchange rate systems is must susceptible to speculation attack?

Accepted Answer

A)  an adjustable peg 
B)  a currency board 
C)  a managed float 
D)  a free float 
A)  an adjustable peg 
B)  a currency board 
C)  a managed float 
D)  a free float A

Question 4

The European Monetary Union:

Accepted Answer

A)  has a common currency 
B)  has a single central bank 
C)  conducts a common monetary policy 
D)  all of the above 
A)  has a common currency 
B)  has a single central bank 
C)  conducts a common monetary policy 
D)  all of the above

Question 5

The policy of changing par values by small preannounced amounts at frequent intervals until the equilibrium exchange rate is reached is called:

Accepted Answer

A)  crawling peg 
B)  adjustable peg 
C)  managed float 
D)  dirty float 
A)  crawling peg 
B)  adjustable peg 
C)  managed float 
D)  dirty float

Question 6

Carefully explain the costs and benefits of a flexible exchange rate regime.

Accepted Answer

A freely floating exchange rate corrects

Question 7

An alleged advantage of flexible over fixed exchange rates is:

Accepted Answer

A)  market efficiency 
B)  stabilizing speculation 
C)  price discipline 
D)  all of the above 
A)  market efficiency 
B)  stabilizing speculation 
C)  price discipline 
D)  all of the above

Question 8

If the band of allowed fluctuation under a fixed exchange rate system is made very wide,the system will resemble:

Accepted Answer

A)  a flexible exchange rate system 
B)  the gold standard 
C)  an adjustable peg 
D)  a crawling peg 
A)  a flexible exchange rate system 
B)  the gold standard 
C)  an adjustable peg 
D)  a crawling peg

Question 9

Carefully explain the costs and benefits of a flexible exchange rate regime.

Accepted Answer

There is less uncertainty for importers

Question 10

International policy coordination may help avoid

Accepted Answer

A)  beggar-thy-neighbor policies 
B)  competitive devaluations 
C)  retaliatory behavior 
D)  all of the above 
A)  beggar-thy-neighbor policies 
B)  competitive devaluations 
C)  retaliatory behavior 
D)  all of the above

Question 11

Explain what are the benefits and costs for a European nation contemplating joining the European Monetary Union.

Accepted Answer

There are some major benefits that the n

Question 12

Under what conditions is the formation of an optimum currency area likely to be more beneficial?

Accepted Answer

An optimum currency area will

Question 13

Which of the following statements is correct with respect to flexible exchange rates?

Accepted Answer

A)  they insulate the domestic economy from external shocks much more than fixed exchange rates 
B)  they are particularly attractive to nations subject to large external shocks 
C)  they provide less stability to an open economy subject to large internal shocks 
D)  all of the above 
A)  they insulate the domestic economy from external shocks much more than fixed exchange rates 
B)  they are particularly attractive to nations subject to large external shocks 
C)  they provide less stability to an open economy subject to large internal shocks 
D)  all of the above

Question 14

The formation of an optimum currency area is more likely to be beneficial:

Accepted Answer

A)  the smaller is the mobility of resource among the various nations of the optimum currency area 
B)  the smaller the structural similarities of member nations are 
C)  the more willing member nations to closely coordinate their fiscal, monetary, and other policies are 
D)  all of the above 
A)  the smaller is the mobility of resource among the various nations of the optimum currency area 
B)  the smaller the structural similarities of member nations are 
C)  the more willing member nations to closely coordinate their fiscal, monetary, and other policies are 
D)  all of the above

Question 15

Most countries in the International Monetary Fund have which of the following currency arrangements?

Accepted Answer

A)  floating rates 
B)  a hard peg 
C)  a soft peg 
D)  some other type of arrangement 
A)  floating rates 
B)  a hard peg 
C)  a soft peg 
D)  some other type of arrangement

Question 16

Under a flexible as compared to a fixed exchange rate system:

Accepted Answer

A)  a nation can more easily achieve its desired inflation-unemployment tradeoff 
B)  it is more difficult for a nation to achieve its desired inflation-unemployment tradeoff 
C)  it is more difficult for a nation to achieve internal balance 
D)  it is more difficult for a nation to achieve external balance 
A)  a nation can more easily achieve its desired inflation-unemployment tradeoff 
B)  it is more difficult for a nation to achieve its desired inflation-unemployment tradeoff 
C)  it is more difficult for a nation to achieve internal balance 
D)  it is more difficult for a nation to achieve external balance

Question 17

Which of the following is not a benefit of participation in the Eurozone?

Accepted Answer

A)  elimination of the need to exchange currencies 
B)  more rapid financial integration 
C)  maintenance of independent monetary policy 
D)  greater economic discipline 
A)  elimination of the need to exchange currencies 
B)  more rapid financial integration 
C)  maintenance of independent monetary policy 
D)  greater economic discipline

Question 18

A primary cause of the Eurozone Crisis has been

Accepted Answer

A)  excessive borrowing by weaker countries in the euro area. 
B)  too rapid growth that has fueled inflation. 
C)  the failure of some nations to join the Eurozone. 
D)  recession in the United States, which caused a recession in Europe. 
A)  excessive borrowing by weaker countries in the euro area. 
B)  too rapid growth that has fueled inflation. 
C)  the failure of some nations to join the Eurozone. 
D)  recession in the United States, which caused a recession in Europe.

Question 19

The European Monetary System is or resembles a:

Accepted Answer

A)  fixed exchange rate system 
B)  a managed exchange rate system 
C)  a crawling peg system 
D)  a freely flexible exchange rate system 
A)  fixed exchange rate system 
B)  a managed exchange rate system 
C)  a crawling peg system 
D)  a freely flexible exchange rate system

Question 20

What are the advantages of the adoption of the euro as common currency for the euro member nations?

Accepted Answer

Elimination of the need to exchange curr

Exam 20: Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

Flexible exchange rates:

Why is a flexible exchange rate system likely to be more efficient that a fixed exchange rate system?

Which of the following exchange rate systems is must susceptible to speculation attack?

The European Monetary Union:

The policy of changing par values by small preannounced amounts at frequent intervals until the equilibrium exchange rate is reached is called:

Carefully explain the costs and benefits of a flexible exchange rate regime.

An alleged advantage of flexible over fixed exchange rates is:

If the band of allowed fluctuation under a fixed exchange rate system is made very wide,the system will resemble:

Carefully explain the costs and benefits of a flexible exchange rate regime.

International policy coordination may help avoid

Explain what are the benefits and costs for a European nation contemplating joining the European Monetary Union.

Under what conditions is the formation of an optimum currency area likely to be more beneficial?

Which of the following statements is correct with respect to flexible exchange rates?

The formation of an optimum currency area is more likely to be beneficial:

Most countries in the International Monetary Fund have which of the following currency arrangements?

Under a flexible as compared to a fixed exchange rate system:

Which of the following is not a benefit of participation in the Eurozone?

A primary cause of the Eurozone Crisis has been

The European Monetary System is or resembles a:

What are the advantages of the adoption of the euro as common currency for the euro member nations?

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

The International Monetary System: Past, present, and Future Answers to Selected Problems on Web

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