Deck 16: The International Monetary System: Past, present, and Future

Question 1

______________ is a convertible currency used by monetary authorities in foreign exchange markets to keep the exchange rate from moving outside some predefined range.

A)Revaluation currency
B)Intervention currency
C)Devaluation currency
D)Both A & B

Answer 1

B

Question 2

An international monetary system can be evaluated in terms of the following except?

A)The adjustment process
B)Transparency
C)Confidence
D)Liquidity

Answer 2

B

Question 3

Which international institution was created under the Bretton Woods system to provide borrowing facilities for nations in temporary balance-of-payments difficulties and for overseeing international trade conduct?

A)International Monetary Fund
B)International Bank for Reconstruction and Development
C)International Development Association
D)International Finance Corporation

Answer 3

A

Question 4

After 1958,which of the following was a measure undertaken by the United States to correct the rapidly growing balance-of-payments deficits?

A)The encouragement of exports
B)An increase in government expenditures abroad
C)Allowed capital to flow freely
D)Increased the amount of unconditional foreign aid to the developing countries

Question 5

Which international institution was set up in 1956 to stimulate private investments in developing nations from indigenous and foreign sources?

A)International Monetary Fund
B)International Bank for Reconstruction and Development
C)International Development Association
D)International Finance Corporation

Question 6

The repayment period for borrowing from the IMF is approximately how long?

A)1-3 years
B)indefinitely
C)3-5 years
D)10-20 years

Question 7

Up to 1957,the U.S.deficits were small and the United States settled most of them in dollars.Nations with surplus were willing to accept dollars for what reason?

A)The U.S.stood ready to exchange dollars for gold at the fixed price of $35 an ounce
B)Dollars could be used as an international currency in bilateral transactions with US only
C)Dollar deposits earned no interest
D)US was going to devalue their currency

Question 8

Which international institution was set up in 1960 to make loans at subsidized rates to poorer developing countries?

A)International Monetary Fund
B)International Bank for Reconstruction and Development
C)International Development Association
D)International Finance Corporation

Question 9

After the transition period ended,the Bretton Woods system required that the member countries implement all of the following except

A)Remove all restrictions on the convertibility of their currencies into dollar
B)Do not impose additional trade restrictions
C)Do not have restrictions on international liquid financial flows
D)Existing trade restrictions were to be removed gradually

Question 10

During which time period did the gold standard system operate?

A)1880-1914
B)1917-1934
C)1923-1948
D)1932-1960

Question 11

What are the arrangements under which the IMF negotiated to borrow from the "Group of Ten" and Switzerland to augment its resources? A.General Arrangements to Borrow
B)Diminutive arrangements
C)Standby arrangements
D)Swap arrangements

Question 12

Which of the following is a valid exchange rate classification?

A)Walking peg system
B)Managed floating
C)Fixed peg system
D)Managed fixed system

Question 13

_______ is a standard of international reserve classification.

A)A silver standard
B)A silver-exchange standard
C)A pure fiduciary standard
D)A gold-silver standard

Question 14

____________ was in fact a gold-exchange standard that operated from the end of WWII until 1971?

A)The International exchange system
B)The Bretton Woods system
C)The GAB gold system
D)The Smithsonian system

Question 15

The international monetary system refers to all of the following except?

A)Rules for effecting international payments
B)Customs,instruments and facilities for effecting international payments
C)Organizations for effecting international payments
D)Tariff,Quota and NTBs affecting the volume of international trade.

Question 16

What are the arrangements under which national central banks negotiate to exchange each other's currency to be used to intervene in foreign exchange markets to combat international hot money flows?

A)General Arrangements to Borrow
B)Diminutive arrangements
C)Standby arrangements
D)Swap arrangements

Question 17

By 2011,how many countries had become a member of the IMF?

A)151
B)186
C)132
D)113

Question 18

Which international institution was established after WWII to provide long-run development assistance to developing nations?

A)International Monetary Fund
B)International Bank for Reconstruction and Development
C)International Development Association
D)International Finance Corporation

Question 19

Which of these statements about the International Monetary Fund is not true?

A)It was created for the purpose of overseeing that nations followed an agreed-upon set of rules in international trade.
B)It provided borrowing facilities for nations in temporary balance-of-payments difficulties
C)Only in a case of fundamental disequilibrium was a nation allowed to change the par value of its currency
D)The IMF began normal operations on March 1,1950,with a membership of 35 nations.

Question 20

What are the arrangements under which member nations negotiate with the IMF for advance approval for future borrowings from the Fund so they will be immediately available?

A)General Arrangements to Borrow
B)Diminutive arrangements
C)Standby arrangements
D)Swap arrangements

Question 21

Which agreement devalued the dollar approximately 9 percent while other currencies were revalued?

A)The Jamaica Accords
B)The Smithsonian Agreement
C)The European Cooperation Agreement
D)The Geneva Agreement

Question 22

To avoid or minimize international financial crises in the future,the IMF is taking which of the following measures?

A)Reducing transparency in international monetary relations
B)Strengthening emerging markets' banking and financial systems
C)Discouraging private sector involvement
D)Increasing quantitative control over trade

Question 23

To avoid or minimize international financial crises in the future,the IMF is taking which of the following measures?

A)Increasing transparency in international monetary relations
B)Reducing regulations on emerging markets' banking and financial systems
C)Discouraging private sector involvement
D)Increasing quantitative control over trade

Question 24

In the early 1970s in the face of destabilizing financial movements out of dollars,President Nixon was forced to do a number of things.Choose from the list below,the thing that he (US)did not do?

A)Suspended the convertibility of dollars into gold
B)Imposed wage and price controls
C)Imposed a 10 percent export surcharge
D)Imposed a 10 percent import surcharge

Question 25

Which of the following is not considered as one of the three major trading blocs in the world?

A)North American Free Trade Agreement (NAFTA)
B)European Union (EU)
C)Central American Trading Block
D)Asian Bloc

Question 26

The Smithsonian Agreement resulted in which of the following?

A)A revaluation of the dollar by about 9 percent
B)Exchange rates were allowed to fluctuate by +/- 2.25%
C)The dollar convertibility was reintroduced
D)US was allowed to continue with the 10% import surcharge

Question 27

After 1958,which of the following was a measure undertaken by the United States to correct the rapidly growing balance-of-payments deficits?

A)The U.S.discouraged exports
B)There was a decrease in US military expenditure abroad
C)Capital was allowed to flow freely
D)There was an increase in US government expenditure abroad

Question 28

The Smithsonian Agreement resulted in which of the following?

A)A revaluation of the dollar by about 9 percent
B)A revaluation of other currencies including the Japanese yen and the German mark
C)The dollar convertibility into gold was reintroduced
D)The band of fluctuation was reduced from 2.25% to 1%

Question 29

To overcome the stagnant growth it was experiencing for the past 10-15 years,Japan undertook which of the following measures? A.A reduction of interest rates to near 0%
B)Undertook programs to build infrastructure (roads,etc.)that oftentimes was not necessary
C)Undervaluation of the yen
D)All of the above

Question 30

After 1958,which of the following was a measure undertaken by the United States to correct the rapidly growing balance-of-payments deficits? A.Foreign aid was tied
B)There was an increase in military spending
C)Exports were discouraged
D)Imports were encouraged

Question 31

After 1958,which of the following was a measure undertaken by the United States to correct the rapidly growing balance-of-payments deficits?

A)Increased unconditional foreign aid
B)There was an increase in military spending
C)Direct controls were placed on capital outflows
D)Discouraged Exports and Imports

Question 32

Which of the following statements about the Uruguay Round is true?

A)The insurance sector was not included in the agreement
B)Subsidies on agriculture were reduced to an all-time low
C)Patent protection for pharmaceuticals was promising
D)Computer chips are no longer subject to tariffs

Question 33

What economic term represents the large amount of foreign-held dollars resulting from past US balance-of-payments deficits?

A)Dollar superfluity
B)Dollar overhang
C)Dollar glut
D)Unaccounted dollars

Question 34

Which of the following are international economic problems facing the world today?

A)Trade protectionism in industrial countries
B)High structural unemployment and slow growth in Europe and stagnation in Japan
C)Job insecurity from restructuring and downsizing in the U.S.
D)All of the above

Question 35

In 1971 with the Smithsonian Agreement,representatives from the Group of Ten nations agreed to increase the dollar price for an ounce of gold to what amount?

A)$38
B)$46
C)$100
D)$315

Question 36

The excess supply of dollars in the hands of foreign monetary authorities is referred to as what?

A)Dollar superfluity
B)Dollar overhang
C)Dollar glut
D)None of the above

Question 37

After the recent global financial crisis,which group or bloc essentially replaced the Group of Seven (G-7)as the steering committee of the world economy?

A)Central American trading bloc
B)South African trading bloc
C)Asian block
D)Group of Twenty (G-20)

Question 38

Which agreement,ratified in 1978,recognized the managed float and abolished the official price of gold?

A)The Jamaica Accords
B)The Smithsonian Agreement
C)The European Cooperation Agreements
D)General Agreement to Borrow

Question 39

Which of the following statements about the Uruguay Round is true? A.Textile subsidies were reduced to an all-time low
B)Patent protection for pharmaceuticals was disappointing
C)Subsidies on agriculture were reduced to an all-time low
D)The insurance sector was included in the agreement

Question 40

During which decades did 'dollar glut' develop? A.Late 1940s,early 1950s
B)Late 1950s,early 1960s
C)Late 1960s,early 1970s
D)Late 1970s,early 1980s

Question 41

It is not possible to combine the various international reserve classifications,as they are mutually exclusive by nature.

Question 42

The 25% of a nation's quota in the IMF that the nation was originally required to pay in gold and could then borrow from the Fund almost automatically is known as the gold tranche.

Question 43

Adjustment is the process by which balance-of-payments disequilibria are corrected.

Question 44

Confidence is the knowledge that the balance-of-payments adjustment mechanism is working adequately.

Question 45

Once a nation joins the IMF they are able to borrow 25% of their quota each year.The first loan,which could be borrowed without any restrictions or conditions,is referred to as a credit tranche.

Question 46

Liquidity refers to the amount of international reserve assets available to settle long-term balance-of-payments disequilibria.

Question 47

The Special Drawing Rights international reserves were created by the IMF to supplement other international reserves and distributed to member nations according to their quotas in the fund.

Question 48

Rapid technological change,globalization,and increased competition from the manufactured exports of emerging market economies are causing which of the following in the United States? A.Increased employment
B)Job security
C)Increased wages
D)Firm downsizing

Question 49

The Bretton Woods System replaced the gold standard as the international exchange system,yet continued to use gold as an indirect foundation of foreign exchange rates.Briefly discuss the system and its development and ultimate collapse.

Question 50

After the Smithsonian Agreement and the devalued dollar,it was even more prudent for the US to maintain a stock of gold for convertibility purposes.

Question 51

Under the Gold Standard if a country suffered from balance-of-payment disequilibrium,what was the process of adjustment? Please explain.

Question 52

What policy should a country like the United States pursue in the face of increased competition from manufactured exports of emerging economies?

Question 53

Fundamental disequilibrium is concerned only with large and persistent balance-of-payments deficits,because as economic theory tells us 'more is better' and thus surpluses are inherently good.

Question 54

Seigniorage is a high-level status established within the IMF once a nation reaches a predefined level of gross domestic product and thus a significant investment in the Fund itself.

Question 55

In the event that one nation is able to exchange one national currency for another without any restriction or limitation,it is said that the currency is considered convertible.