Question 1

What is dollarization? What are some of the benefits and cost that go along with it?

Accepted Answer

Dollarization is the situation whereby a nation adopts another nation's currency as its legal tender.The benefits of dollarization arise from the nation: avoiding the cost of exchanging the domestic currency for dollars and the need to hedge foreign exchange risks,facing an inflation and interest rate similar to that of the United States,avoiding foreign exchange crises and the need for foreign exchange and trade controls,and fostering budgetary discipline and encouraging more rapid and full international financial integration.The costs are: the cost of replacing the domestic currency with the dollar,the loss of independence of monetary and exchange rate policies,and the loss of its central bank as a lender of last resort and other financial institutions in case of a crisis.

Question 2

Which of the following does a nation sacrifice when dollarization takes place?

Accepted Answer

A) conducting its own monetary policy 
B) acting as a lender of last resort 
C) collecting seigniorage from independently issuing its own currency 
D) all of the above 
A) conducting its own monetary policy 
B) acting as a lender of last resort 
C) collecting seigniorage from independently issuing its own currency 
D) all of the above D

Question 3

The system under which exchange rates or par values are periodically changed to correct balance-of-payments disequilibria is known as a(n):

Accepted Answer

A) currency board arrangements 
B) adjustable peg system 
C) crawling peg system 
D) managed floating exchange rate system 
A) currency board arrangements 
B) adjustable peg system 
C) crawling peg system 
D) managed floating exchange rate system B

Question 4

Robert Mundell and Ronald McKennion developed the theory of optimum currency during the 1960s.

Accepted Answer

A) True 
 B)False

Question 5

The currencies of member nations in an optimum currency area float jointly with respect to the currencies of nonmember nations.

Accepted Answer

A) True 
 B)False

Question 6

A(n)_____________ refers to a group of nations whose national currencies are linked through permanently fixed exchange rates.

Accepted Answer

A) optimum currency area 
B) adjustable peg system 
C) fixed exchange rate system 
D) flexible exchange rate system 
A) optimum currency area 
B) adjustable peg system 
C) fixed exchange rate system 
D) flexible exchange rate system

Question 7

In order to attain the goal of a monetary union,the president of the European Commission,recommended a stage based transition.Which stage of this transition called for convergence of economic performance and cooperation in monetary and fiscal policy?

Accepted Answer

A) stage one 
B) stage two 
C) stage three 
D) stage four 
A) stage one 
B) stage two 
C) stage three 
D) stage four

Question 8

In 1997,the ________________ was negotiated to further tighten the fiscal constraint of participating countries in European Monetary Union.

Accepted Answer

A) Maastricht Treaty 
B) Stability and Growth Pact 
C) European Currency Unit 
D) European Monetary System 
A) Maastricht Treaty 
B) Stability and Growth Pact 
C) European Currency Unit 
D) European Monetary System

Question 9

What are the advantages and disadvantages of fixed versus flexible exchange rates?

Accepted Answer

The advantages and disadvantages of each

Question 10

_________________ are the most extreme form of a fixed exchange rate system,short of adopting a common currency or dollarization.

Accepted Answer

A) Currency board arrangements 
B) Adjustable peg systems 
C) Crawling peg systems 
D) Managed floating exchange rate systems 
A) Currency board arrangements 
B) Adjustable peg systems 
C) Crawling peg systems 
D) Managed floating exchange rate systems

Question 11

In order to attain the goal of a monetary union,the president of the European Commission recommended a stage based transition.Which stage of this transition called for the creation of an European Monetary Institute (EMI)?

Accepted Answer

A) Stage one 
B) Stage two 
C) Stage three 
D) Stage four 
A) Stage one 
B) Stage two 
C) Stage three 
D) Stage four

Question 12

Under a flexible exchange rate system,monetary policies must be changed in order to correct the nation's balance of payments disequilibrium.

Accepted Answer

A) True 
 B)False

Question 13

The situation whereby a nation adopts another nation's currency as its legal tender is known as:

Accepted Answer

A) Currency board arrangements 
B) Dollarization 
C) Crawling peg system 
D) Managed floating exchange rate system 
A) Currency board arrangements 
B) Dollarization 
C) Crawling peg system 
D) Managed floating exchange rate system

Question 14

What system was created to avoid the disadvantage of relatively large changes in par values and possibly destabilizing speculation?

Accepted Answer

A) Currency board arrangements 
B) Adjustable peg system 
C) Crawling peg system 
D) Managed floating exchange rate system 
A) Currency board arrangements 
B) Adjustable peg system 
C) Crawling peg system 
D) Managed floating exchange rate system

Question 15

What are the advantages of International Macroeconomic Policy Coordination?

Accepted Answer

Since the world has become increasingly

Question 16

The formation of a(n)_____________ eliminates the uncertainty that arises when exchange rates are not permanently fixed,which in turn stimulates specialization in production among member nations.

Accepted Answer

A) optimum currency area 
B) adjustable peg system 
C) fixed exchange rate system 
D) flexible exchange rate system 
A) optimum currency area 
B) adjustable peg system 
C) fixed exchange rate system 
D) flexible exchange rate system

Question 17

A(n)_________________ allows an optimum currency area to be more likely to experience greater price stability.

Accepted Answer

A) permanently flexible exchange rate 
B) permanently fixed exchange rate 
C) managed peg system 
D) currency board 
A) permanently flexible exchange rate 
B) permanently fixed exchange rate 
C) managed peg system 
D) currency board

Question 18

Which of the following EU countries did not accept Euro as its currency

Accepted Answer

A) Austria 
B) Belgium 
C) Sweden 
D) Italy 
A) Austria 
B) Belgium 
C) Sweden 
D) Italy

Question 19

Under which system does a nation not concern itself with external balance?

Accepted Answer

A) flexible exchange rate system 
B) fixed exchange rate system 
C) managed peg 
D) gold standard 
A) flexible exchange rate system 
B) fixed exchange rate system 
C) managed peg 
D) gold standard

Question 20

Advocates of fixed exchange rates claim that flexible exchange rates reduce the volume of international trade and investment,are more likely to lead to destabilizing speculation and are inflationary.

Accepted Answer

A) True 
 B)False

What is dollarization? What are some of the benefits and cost that go along with it?

Which of the following does a nation sacrifice when dollarization takes place?

The system under which exchange rates or par values are periodically changed to correct balance-of-payments disequilibria is known as a(n):

Robert Mundell and Ronald McKennion developed the theory of optimum currency during the 1960s.

The currencies of member nations in an optimum currency area float jointly with respect to the currencies of nonmember nations.

A(n)_____________ refers to a group of nations whose national currencies are linked through permanently fixed exchange rates.

In order to attain the goal of a monetary union,the president of the European Commission,recommended a stage based transition.Which stage of this transition called for convergence of economic performance and cooperation in monetary and fiscal policy?

In 1997,the ________________ was negotiated to further tighten the fiscal constraint of participating countries in European Monetary Union.

What are the advantages and disadvantages of fixed versus flexible exchange rates?

_________________ are the most extreme form of a fixed exchange rate system,short of adopting a common currency or dollarization.

In order to attain the goal of a monetary union,the president of the European Commission recommended a stage based transition.Which stage of this transition called for the creation of an European Monetary Institute (EMI)?

Under a flexible exchange rate system,monetary policies must be changed in order to correct the nation's balance of payments disequilibrium.

The situation whereby a nation adopts another nation's currency as its legal tender is known as:

What system was created to avoid the disadvantage of relatively large changes in par values and possibly destabilizing speculation?

What are the advantages of International Macroeconomic Policy Coordination?

The formation of a(n)_____________ eliminates the uncertainty that arises when exchange rates are not permanently fixed,which in turn stimulates specialization in production among member nations.

A(n)_________________ allows an optimum currency area to be more likely to experience greater price stability.

Which of the following EU countries did not accept Euro as its currency

Under which system does a nation not concern itself with external balance?

Advocates of fixed exchange rates claim that flexible exchange rates reduce the volume of international trade and investment,are more likely to lead to destabilizing speculation and are inflationary.

Introduction to the Global Economy

Comparative Advantage

The Standard Trade Model

The Heckscher-Ohlin and Other Trade Theories

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the Political Economy of Protectionism

Economic Integration

Growth and Development With International Trade

International Resource Movements and Multinational Corporations

Balance of Payments

The Foreign Exchange Market and Exchange Rates

Exchange Rate Determination

Automatic Adjustments With Flexible and Fixed Exchange Rates

Adjustment Policies

The International Monetary System: Past, present, and Future

Filters

Exam 15: Flexible Versus Fixed Exchange Rates,european Monetary Systems,and Macroeconomic Policy Coordination

What is dollarization? What are some of the benefits and cost that go along with it?

Which of the following does a nation sacrifice when dollarization takes place?

The system under which exchange rates or par values are periodically changed to correct balance-of-payments disequilibria is known as a(n):

Robert Mundell and Ronald McKennion developed the theory of optimum currency during the 1960s.

The currencies of member nations in an optimum currency area float jointly with respect to the currencies of nonmember nations.

A(n)_____________ refers to a group of nations whose national currencies are linked through permanently fixed exchange rates.

In order to attain the goal of a monetary union,the president of the European Commission,recommended a stage based transition.Which stage of this transition called for convergence of economic performance and cooperation in monetary and fiscal policy?

In 1997,the ________________ was negotiated to further tighten the fiscal constraint of participating countries in European Monetary Union.

What are the advantages and disadvantages of fixed versus flexible exchange rates?

_________________ are the most extreme form of a fixed exchange rate system,short of adopting a common currency or dollarization.

In order to attain the goal of a monetary union,the president of the European Commission recommended a stage based transition.Which stage of this transition called for the creation of an European Monetary Institute (EMI)?

Under a flexible exchange rate system,monetary policies must be changed in order to correct the nation's balance of payments disequilibrium.

The situation whereby a nation adopts another nation's currency as its legal tender is known as:

What system was created to avoid the disadvantage of relatively large changes in par values and possibly destabilizing speculation?

What are the advantages of International Macroeconomic Policy Coordination?

The formation of a(n)_____________ eliminates the uncertainty that arises when exchange rates are not permanently fixed,which in turn stimulates specialization in production among member nations.

A(n)_________________ allows an optimum currency area to be more likely to experience greater price stability.

Which of the following EU countries did not accept Euro as its currency

Under which system does a nation not concern itself with external balance?

Advocates of fixed exchange rates claim that flexible exchange rates reduce the volume of international trade and investment,are more likely to lead to destabilizing speculation and are inflationary.

Introduction to the Global Economy

Comparative Advantage

The Standard Trade Model

The Heckscher-Ohlin and Other Trade Theories

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the Political Economy of Protectionism

Economic Integration

Growth and Development With International Trade

International Resource Movements and Multinational Corporations

Balance of Payments

The Foreign Exchange Market and Exchange Rates

Exchange Rate Determination

Automatic Adjustments With Flexible and Fixed Exchange Rates

Adjustment Policies

The International Monetary System: Past, present, and Future

Filters