Exam 15: Exchange-rate Systems and Currency Crises

Because there is no exchange stabilization fund under floating exchange rates,any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

Which exchange-rate system involves a "leaning against the wind" strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run?

The flexibility of floating rates may generate the problem of

To keep the yen's exchange value from appreciating against the dollar,Japan's exchange stabilization fund would buy yen for dollars on the foreign exchange market.

Under adjustable pegged exchange rates,if the rate of inflation in the United States exceeds the rate of inflation of its trading partners:

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.

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:

If the Japanese yen depreciates against other currencies in the exchange markets,this will:

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

To temporarily offset an appreciation in the dollar's exchange value,the Federal Reserve could ____ the U.S.money supply which would promote a (an)____ in U.S.interest rates and a ____ in investment flows to the United States.

The special drawing right is a currency basket of five major industrial country currencies.

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

If Uganda revalues its shilling by 20 percent and Burundi devalues its franc by 5 percent,the shillings exchange value will appreciate by 25 percent against the franc.

If Mexico fully dollarizes its economy,it agrees to

Which nations use multiple exchange rates the most and why?

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:

Exchange rate controls

Table 15.1. The Market for Francs -Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

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