Deck 4: International Monetary System and Balance of Payments

Question 1

A(n) ________ is defined as when a country makes small periodic changes in the value of its currency with the intention of moving it to a particular value over time.

A) Floating exchange rate
B) Crawling peg
C) Managed Float
D) Exchange rate

Answer 1

B

Question 2

Soft currency examples include all of the following except _______.

A) Zimbabwe dollar
B) Cuban Peso
C) South Korean Won
D) North Korean Won

Answer 2

C

Question 3

If the exchange rate of the pound sterling to the U.S. dollar is £2 to $1, but then the exchange rate moves to £3 to $1, what has transpired?

A) Pound sterling has depreciated by 50% relative to the U.S. dollar
B) Pound sterling has appreciated by 50% relative to the U.S. dollar
C) Less U.S. dollars can be purchased by using the same amount of pound sterling
D) U.S. dollar has appreciated by 50% relative to the pound sterling

Answer 3

B

Question 4

The current international monetary system can best be described as _______.

A) Required floating exchange rates for all nations
B) Required managed floating rates for all nations
C) Perfect system of floating exchange rates
D) A non-system

Question 5

Special drawing rights are calculated based on a basket of all of the following currencies except _______.

A) Japanese yen
B) U.S. dollar
C) Chinese yuan
D) British pound

Question 6

The Triffin Paradox states that ________.

A) The bigger the United States gets, the more foreigners want to invest in the USA.
B) The higher a countries exchange rate relative to its largest trading partner the better the performance of the global economy.
C) If at first you don't succeed, try, try again.
D) The more that foreigners rely on the U.S. dollar to expand trade, the less confidence they have that the U.S. can honor its commitment of redeeming dollars for gold.

Question 7

The U.S. raised the official price of gold to $38 per troy ounce under the __________.

A) Louvre Accord
B) Smithsonian Agreement
C) National Geographic Agreement
D) Plaza Accord

Question 8

Which of the following is NOT part of the European Union Convergence criteria?

A) Government deficit must not exceed three percent of GDP
B) Government debt must not exceed sixty of GDP
C) Foreign exchange rate must float within fifteen percent of member countries for two years prior to entry into the euro
D) Government debt must not exceed sixty percent of GDP

Question 9

The _______ of a nation measures its net changes in financial assets and liabilities abroad.

A) Current account
B) Terms of trade
C) Capital account
D) Balance of trade

Question 10

The current account balance for the United States became _______ in the _____.

A) Positive, 2000s
B) Negative, 1960s
C) Negative, 1990s
D) Negative, 1980s

Question 11

The Marx Brothers were an integral part in the formation of the international monetary system.

Question 12

An appreciating currency is good for domestic exporters.

Question 13

Special Drawing Rights are traded at volumes approaching the US dollar on world markets.

Question 14

Iceland is a member of the European Union.

Question 15

The Schengen Agreement involves labor mobility in the EU.