Exam 15: Exchange-Rate Systems and Currency Crises

Under a pegged exchange-rate system,which does not explain why a country would have a balance-of-payments deficit?

Smaller nations with relatively undiversified economies and large trade sectors tend to peg their currencies to one of the world's key currencies.

Under managed floating exchange rates,if the rate of inflation in the United States is less than the rate of inflation of its trading partners,the dollar will likely:

Table 15.1.The Market for Francs -Refer to Table 15.1.If monetary authorities fix the exchange rate at $0.30 per franc,there will be a:

A market-determined decrease in the dollar price of the pound is associated with:

Given an initial equilibrium in the money market and foreign exchange market,suppose the Federal Reserve increases the money supply of the United States.Under a floating exchange-rate system,the dollar would:

The U.S.dollar is generally regarded as the major "key currency" of the international monetary system.

In 1973 the major industrial countries terminated managed-floating exchange rates and adopted an adjustable-pegged exchange rates.

How can currency boards and dollarization prevent currency crises?

A market-determined increase in the dollar price of the pound is associated with:

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.

In order to stabilize a currency,the central bank will need to adopt

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.

In a managed floating exchange-rate system,temporary stabilization of the dollar's exchange value requires the Federal Reserve to adopt a (an)____ monetary policy when the dollar is appreciating and a (an)____ policy when the dollar is depreciating.

Which exchange-rate system does not require monetary reserves for official exchange-rate intervention?

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:

In 1973,the reform of the international monetary system resulted in the change from:

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.

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

A primary objective of dual exchange rates is to allow a country the ability to insulate its balance of payments from net: