Exam 16: The International Financial System

The Bretton Woods agreement set up the ________, which currently provides long-term loans to assist developing countries to build dams, roads, and other physical capital that contributes to economic development.

Depreciation of a currency occurs when

Under a fixed exchange rate regime, when the domestic currency is undervalued, the central bank must ________ the domestic currency to keep the exchange rate fixed; as a result, it ________ international reserves.

By the end of 2010, China had accumulated more than $2 trillion of international reserves. How did China accomplish this? Is the policy sustainable?

What are the arguments for and against the IMF acting as an international lender of last resort?

A central bank sale of ________ to purchase ________ in the foreign exchange market results in an equal decline in its international reserves and the monetary base.

A Federal Reserve decision to purchase dollars by selling foreign assets in the foreign exchange market has the same effect as an open market ________ of bonds to ________ the monetary base and the money supply.

If a central bank does not want to see its currency rise in value, it may pursue ________ monetary policy to ________ the domestic interest rate, thereby weakening its currency.

The difference between merchandise exports and imports is called the

Describe the pros and cons for controls on capital inflows and outflows.

Because other countries hold dollars as international reserves, a U.S. official reserve transactions deficit can be financed by

A dirty float is

When it acts as a lender of last resort, the IMF may increase the likelihood that financial institutions take excessive risks and thus increase moral hazard.

A sterilized intervention leaves the money supply changed and has a direct way of affecting interest rates or the expected future exchange rate.

A current account ________ indicates that the United States is ________ its claims on foreign wealth.

An unsterilized intervention in which domestic currency is sold to purchase foreign assets leads to

What is the bookkeeping system for recording all receipts and payments that have a direct bearing on the movement of funds between a nation and foreign countries?

Which of the following statements is correct?

What shows international transactions that involve currently produced goods and services?

When the Bundesbank lowered German mark interest rates in September 1992,