Question 1

If Uganda devalues its shilling by 10 percent and Burundi devalues its franc by 5 percent,the shilling's exchange value appreciates 10 percent against the franc.

Accepted Answer

A) True 
 B)False

Question 2

Figure 15.2 Market for the British Pound 
-Refer to Figure 15.2.Suppose the United States decreases investment spending in England.Under a floating exchange rate system,the new equilibrium exchange rate would be:

Accepted Answer

A)  $0.40 per franc 
B)  $0.60 per franc 
C)  $0.80 per franc 
D)  $1.00 per franc

Question 3

The purpose of an exchange stabilization fund is to ensure that the market exchange rate does not deviate beyond unacceptable levels from the official exchange rate.

Accepted Answer

A) True 
 B)False

Question 4

Small nations (e.g.,the Ivory Coast)whose trade and financial relationships are mainly with a single partner tend to utilize:

Accepted Answer

A)  Pegged exchange rates 
B)  Freely floating exchange rates 
C)  Managed floating exchange rates 
D)  Crawling pegged exchange rates

Question 5

If Mexico fully dollarizes its economy,it agrees to

Accepted Answer

A)  Print pesos only to finance deficits of its national government 
B)  Use the U.S.dollar alongside its peso to finance transactions 
C)  Have the U.S.Treasury be in charge of its tax collections 
D)  Replace pesos with U.S.dollars in its economy

Question 6

Suppose that Japan maintains a pegged exchange rate that overvalues the yen.This would likely result in:

Accepted Answer

A)  Japanese exports becoming cheaper in world markets 
B)  Imports becoming expensive in the Japanese market 
C)  Unemployment for Japanese workers 
D)  Full employment for Japanese workers

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Table 15.1.The Market for Francs
 
-Refer to Table 15.1.If monetary authorities fix the exchange rate at $0.10 per franc,there would 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 9

Given a two-country world,suppose Japan revalues the yen by 15 percent and South Korea revalues the won by 12 percent.This results in:

Accepted Answer

A)  An appreciation in the value of both currencies 
B)  A depreciation in the value of both currencies 
C)  An appreciation in the value of the yen against the won 
D)  A depreciation in the value of the yen against the won

Question 10

If Uganda sets its par value at 400 shillings per SDR and Burundi sets its par value at 200 francs per SDR,the official exchange rate is 1 franc = o.5 shillings.

Accepted Answer

A) True 
 B)False

Question 11

Many developing nations with low inflation rates have pegged their currencies to the U.S.dollar as a way of allowing modest increases in domestic inflation rates.

Accepted Answer

A) True 
 B)False

Question 12

Which exchange-rate mechanism calls for frequent redefining of the par value by small amounts to remove a payments disequilibrium?

Accepted Answer

A)  Dual exchange rates 
B)  Adjustable pegged exchange rates 
C)  Managed floating exchange rates 
D)  Crawling pegged exchange rates

Question 13

A main purpose of exchange stabilization funds is to:

Accepted Answer

A)  Permit a country to overvalue its currency in the exchange markets 
B)  Permit a country to undervalue its currency in the exchange markets 
C)  Increase the supply of foreign currency when imports exceed exports 
D)  Decrease the supply of foreign currency when imports exceed exports

Question 14

The central bank of the United Kingdom could prevent the pound from appreciating by:

Accepted Answer

A)  Selling pounds on the foreign exchange market 
B)  Buying pounds on the foreign exchange market 
C)  Reducing its inflation rate relative to its trading partners 
D)  Promoting domestic investment and technological development

Question 15

A surplus nation can reduce its payments imbalance by:

Accepted Answer

A)  Applying tariffs and trade restrictions on imports 
B)  Revaluing its national currency 
C)  Increasing its labor productivity 
D)  Setting higher interest rates than its trading partners

Question 16

Given a two-country world,assume Canada and Sweden devalue their currencies by 20 percent.This would result in:

Accepted Answer

A)  An appreciation in the Canadian currency 
B)  An appreciation in the Swedish currency 
C)  An appreciation in both currencies 
D)  An appreciation in neither currency

Question 17

What is the difference between the crawling peg and adjustable pegged exchange rates?

Accepted Answer

The answer of What is the difference between the crawling...

Question 18

The Australian dollar is currently regarded is the key currency of the international monetary system.

Accepted Answer

A) True 
 B)False

Question 19

Rather than constructing their own currency baskets,many nations peg the value of their currencies to a currency basket defined by the International Monetary Fund.Which of the following illustrates this basket?

Accepted Answer

A)  IMF tranche 
B)  Special Drawing Rights 
C)  Primary reserve asset 
D)  Swap facility

Question 20

Under a floating exchange-rate system,if American exports decrease and American imports rise,the value of the dollar will:

Accepted Answer

A)  Appreciate 
B)  Depreciate 
C)  Be officially revalued 
D)  Be officially devalued

Exam 15: Exchange-Rate Systems and Currency Crises

If Uganda devalues its shilling by 10 percent and Burundi devalues its franc by 5 percent,the shilling's exchange value appreciates 10 percent against the franc.

Figure 15.2 Market for the British Pound -Refer to Figure 15.2.Suppose the United States decreases investment spending in England.Under a floating exchange rate system,the new equilibrium exchange rate would be:

The purpose of an exchange stabilization fund is to ensure that the market exchange rate does not deviate beyond unacceptable levels from the official exchange rate.

Small nations (e.g.,the Ivory Coast) whose trade and financial relationships are mainly with a single partner tend to utilize:

If Mexico fully dollarizes its economy,it agrees to

Suppose that Japan maintains a pegged exchange rate that overvalues the yen.This would likely result in:

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.

Table 15.1.The Market for Francs -Refer to Table 15.1.If monetary authorities fix the exchange rate at $0.10 per franc,there would be a:

Given a two-country world,suppose Japan revalues the yen by 15 percent and South Korea revalues the won by 12 percent.This results in:

If Uganda sets its par value at 400 shillings per SDR and Burundi sets its par value at 200 francs per SDR,the official exchange rate is 1 franc = o.5 shillings.

Many developing nations with low inflation rates have pegged their currencies to the U.S.dollar as a way of allowing modest increases in domestic inflation rates.

Which exchange-rate mechanism calls for frequent redefining of the par value by small amounts to remove a payments disequilibrium?

A main purpose of exchange stabilization funds is to:

The central bank of the United Kingdom could prevent the pound from appreciating by:

A surplus nation can reduce its payments imbalance by:

Given a two-country world,assume Canada and Sweden devalue their currencies by 20 percent.This would result in:

What is the difference between the crawling peg and adjustable pegged exchange rates?

The Australian dollar is currently regarded is the key currency of the international monetary system.

Rather than constructing their own currency baskets,many nations peg the value of their currencies to a currency basket defined by the International Monetary Fund.Which of the following illustrates this basket?

Under a floating exchange-rate system,if American exports decrease and American imports rise,the value of the dollar will: