Exam 19: Fixed Versus Floating: International Monetary Experience

Suppose that Canada decides to peg its dollar ($C, or the loonie) to the U.S. dollar at an exchange rate of $C1 = $US1. What will happen to the Canadian IS curve as a result of the leftward shift of the U.S. IS curve?

When exchange rates are volatile:

Developing countries have been able to reduce the effect of depreciation on the value of their debt by:

In a system in which there is an administered exchange rate, what is the term used when the government sets the rate higher to buy fewer units of foreign currency?

Why are cooperative arrangements difficult to negotiate and maintain?

Traders in nations abiding by rules of Bretton Woods found ways to avert restrictions on _______ by offshore banking and improper accounting reporting.

To maintain a pegged rate, a nation faces a trilemma and must also:

Prices in the European ERM countries on fixed exchange rates have converged ___ than for nations outside the ERM.

A nation's total external wealth is calculated as:

More borrowing by firms in the domestic currency is one way to reduce currency mismatch. What would be the major issue if government insured repayment of the loans at a low cost?

Suppose that Canada decides to peg its dollar ($C, or the loonie) to the U.S. dollar at an exchange rate of $C1 = $US1. What will happen to Canadian interest rates as a result of the leftward shift of the U.S. IS curve?

If Britain allows the pound-DM (Deutsche Mark) exchange rate to float, and there is an increase in the foreign interest rate, it:

Britain's decision to exit the ERM in September 1992 had what effect?

The effect of an exchange rate system on the price level between countries is that:

Suppose that Argentina's dollar-denominated external assets and liabilities are $10 billion and $100 billion, respectively, and its Argentine peso-denominated external assets and liabilities are each 50 billion pesos (P). Suppose further that Argentina fixes its exchange rate at P1 = $US1. How was Argentina's net external wealth affected as a result of the devaluation of the peso (from P1 = $US1 to P3 = $US1)?

Suppose that Mexico and Canada both peg their currencies to the U.S. dollar. The relationship between the Mexican peso and the Canadian dollar is best described as a(n):

Since Britain withdrew from the ERM in 1992, what has it done with regard to fixing its exchange rates?

To maintain a functioning gold standard:

Research shows that when exchange rates are more volatile, the price differentials are ____ and the convergence is _____.

What are benefits of a cooperative peg versus a noncooperative peg?