Question 1

Under a pegged exchange-rate system,which does not explain why a country would have a balance-of-payments deficit?

Accepted Answer

A)  Very high rates of inflation occur domestically 
B)  Foreigners discriminate against domestic products 
C)  Technological advance is superior abroad 
D)  The domestic currency is undervalued relative to other currencies

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Under managed floating exchange rates,if the rate of inflation in the United States is less than the rate of inflation of its trading partners,the dollar will likely:

Accepted Answer

A)  Appreciate against foreign currencies 
B)  Depreciate against foreign currencies 
C)  Be officially revalued by the government 
D)  Be officially devalued by the government

Question 4

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:

Accepted Answer

A)  Shortage of 200 francs 
B)  Shortage of 400 francs 
C)  Surplus of 200 francs 
D)  Surplus of 400 francs

Question 5

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

Accepted Answer

A)  Revaluation of the dollar 
B)  Devaluation of the dollar 
C)  Appreciation of the dollar 
D)  Depreciation of the dollar

Question 6

Given an initial equilibrium in the money market and foreign exchange market,suppose the Federal Reserve increases the money supply of the United States.Under a floating exchange-rate system,the dollar would:

Accepted Answer

A)  Appreciate in value relative to other currencies 
B)  Depreciate in value relative to other currencies 
C)  Be officially devalued by the government 
D)  Be officially revalued by the government

Question 7

The U.S.dollar is generally regarded as the major "key currency" of the international monetary system.

Accepted Answer

A) True 
 B)False

Question 8

In 1973 the major industrial countries terminated managed-floating exchange rates and adopted an adjustable-pegged exchange rates.

Accepted Answer

A) True 
 B)False

Question 9

How can currency boards and dollarization prevent currency crises?

Accepted Answer

The answer of How can currency boards and dollarization prevent...

Question 10

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

Accepted Answer

A)  Revaluation of the dollar 
B)  Devaluation of the dollar 
C)  Appreciation of the dollar 
D)  Depreciation of the dollar

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

In order to stabilize a currency,the central bank will need to adopt

Accepted Answer

A)  An expansionary monetary policy to offset currency depreciation 
B)  An expansionary monetary policy to offset currency appreciation 
C)  A contractionary policy to offset currency appreciation 
D)  Both b and c

Question 13

Under managed-floating exchange rates,market forces are allowed to determine exchange rates in the short run while central bank intervention is used to stabilize exchange rates in the long run.

Accepted Answer

A) True 
 B)False

Question 14

In a managed floating exchange-rate system,temporary stabilization of the dollar's exchange value requires the Federal Reserve to adopt a (an)____ monetary policy when the dollar is appreciating and a (an)____ policy when the dollar is depreciating.

Accepted Answer

A)  Expansionary,expansionary 
B)  Expansionary,contractionary 
C)  Contractionary,expansionary 
D)  Contractionary,contractionary

Question 15

Which exchange-rate system does not require monetary reserves for official exchange-rate intervention?

Accepted Answer

A)  Floating exchange rates 
B)  Pegged exchange rates 
C)  Managed floating exchange rates 
D)  Dual exchange rates

Question 16

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:

Accepted Answer

A)  Adjustable pegged exchange rate system 
B)  Dual exchange rate system 
C)  Jointly floating exchange rate system 
D)  Freely floating exchange rate system

Question 17

In 1973,the reform of the international monetary system resulted in the change from:

Accepted Answer

A)  Adjustable pegged rates to managed floating rates 
B)  Managed floating rates to adjustable pegged rates 
C)  Crawling pegged rates to freely floating rates 
D)  Freely floating rates to crawling pegged rates

Question 18

Small nations,such as Angola and Barbados,peg their currencies to the U.S.dollar since the prices of many of their traded goods are determined in markets in which the dollar is the key currency.

Accepted Answer

A) True 
 B)False

Question 19

Developing countries with more than one major trading partner often peg their currencies to a group or basket of those trading partner currencies.

Accepted Answer

A) True 
 B)False

Question 20

A primary objective of dual exchange rates is to allow a country the ability to insulate its balance of payments from net:

Accepted Answer

A)  Current account transactions 
B)  Unilateral transfers 
C)  Merchandise trade transactions 
D)  Capital account transactions

Exam 15: Exchange-Rate Systems and Currency Crises

Under a pegged exchange-rate system,which does not explain why a country would have a balance-of-payments deficit?

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

Under managed floating exchange rates,if the rate of inflation in the United States is less than the rate of inflation of its trading partners,the dollar will likely:

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:

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

Given an initial equilibrium in the money market and foreign exchange market,suppose the Federal Reserve increases the money supply of the United States.Under a floating exchange-rate system,the dollar would:

The U.S.dollar is generally regarded as the major "key currency" of the international monetary system.

In 1973 the major industrial countries terminated managed-floating exchange rates and adopted an adjustable-pegged exchange rates.

How can currency boards and dollarization prevent currency crises?

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

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.

In order to stabilize a currency,the central bank will need to adopt

Under managed-floating exchange rates,market forces are allowed to determine exchange rates in the short run while central bank intervention is used to stabilize exchange rates in the long run.

In a managed floating exchange-rate system,temporary stabilization of the dollar's exchange value requires the Federal Reserve to adopt a (an) monetary policy when the dollar is appreciating and a (an) policy when the dollar is depreciating.

Which exchange-rate system does not require monetary reserves for official exchange-rate intervention?

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:

In 1973,the reform of the international monetary system resulted in the change from:

Small nations,such as Angola and Barbados,peg their currencies to the U.S.dollar since the prices of many of their traded goods are determined in markets in which the dollar is the key currency.

Developing countries with more than one major trading partner often peg their currencies to a group or basket of those trading partner currencies.

A primary objective of dual exchange rates is to allow a country the ability to insulate its balance of payments from net:

Exam 15: Exchange-Rate Systems and Currency Crises

Under a pegged exchange-rate system,which does not explain why a country would have a balance-of-payments deficit?

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

Under managed floating exchange rates,if the rate of inflation in the United States is less than the rate of inflation of its trading partners,the dollar will likely:

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:

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

Given an initial equilibrium in the money market and foreign exchange market,suppose the Federal Reserve increases the money supply of the United States.Under a floating exchange-rate system,the dollar would:

The U.S.dollar is generally regarded as the major "key currency" of the international monetary system.

In 1973 the major industrial countries terminated managed-floating exchange rates and adopted an adjustable-pegged exchange rates.

How can currency boards and dollarization prevent currency crises?

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

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.

In order to stabilize a currency,the central bank will need to adopt

Under managed-floating exchange rates,market forces are allowed to determine exchange rates in the short run while central bank intervention is used to stabilize exchange rates in the long run.

In a managed floating exchange-rate system,temporary stabilization of the dollar's exchange value requires the Federal Reserve to adopt a (an) ____ monetary policy when the dollar is appreciating and a (an) ____ policy when the dollar is depreciating.

Which exchange-rate system does not require monetary reserves for official exchange-rate intervention?

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:

In 1973,the reform of the international monetary system resulted in the change from:

Small nations,such as Angola and Barbados,peg their currencies to the U.S.dollar since the prices of many of their traded goods are determined in markets in which the dollar is the key currency.

Developing countries with more than one major trading partner often peg their currencies to a group or basket of those trading partner currencies.

A primary objective of dual exchange rates is to allow a country the ability to insulate its balance of payments from net:

In a managed floating exchange-rate system,temporary stabilization of the dollar's exchange value requires the Federal Reserve to adopt a (an) monetary policy when the dollar is appreciating and a (an) policy when the dollar is depreciating.