Question 1

Because there is no exchange stabilization fund under floating exchange rates,any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

Accepted Answer

A) True 
 B)False

Question 2

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

Accepted Answer

A)  Sell dollars on the foreign exchange market and lower domestic interest rates 
B)  Sell dollars on the foreign exchange market and raise domestic interest rates 
C)  Buy dollars on the foreign exchange market and lower domestic interest rates 
D)  Buy dollars on the foreign exchange market and raise domestic interest rates

Question 3

Which exchange-rate system involves a "leaning against the wind" strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run?

Accepted Answer

A)  Pegged or fixed exchange rates 
B)  Adjustable pegged exchange rates 
C)  Managed floating exchange rates 
D)  Freely floating exchange rates

Question 4

The flexibility of floating rates may generate the problem of

Accepted Answer

A)  Inflationary bias 
B)  Deflationary bias 
C)  Continuous depreciation 
D)  Both a and c

Question 5

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 6

Under adjustable pegged exchange rates,if the rate of inflation in the United States exceeds the rate of inflation of its trading partners:

Accepted Answer

A)  U.S. exports tend to rise and imports tend to fall 
B)  U.S. imports tend to rise and exports tend to fall 
C)  U.S. foreign exchange reserves tend to rise 
D)  U.S. foreign exchange reserves remain constant

Question 7

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 8

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 9

If the Japanese yen depreciates against other currencies in the exchange markets,this will:

Accepted Answer

A)  Have no effect on the Japanese balance of trade 
B)  Tend to worsen the Japanese balance of trade 
C)  Tend to improve the Japanese balance of trade 
D)  None of the above

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

To temporarily offset an appreciation in the dollar's exchange value,the Federal Reserve could ____ the U.S.money supply which would promote a (an)____ in U.S.interest rates and a ____ in investment flows to the United States.

Accepted Answer

A)  Increase, decrease, decrease 
B)  Increase, increase, decrease 
C)  Decrease, decrease, decrease 
D)  Decrease, increase, decrease

Question 12

The special drawing right is a currency basket of five major industrial country currencies.

Accepted Answer

A) True 
 B)False

Question 13

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

Accepted Answer

A) True 
 B)False

Question 14

If Uganda revalues its shilling by 20 percent and Burundi devalues its franc by 5 percent,the shillings exchange value will appreciate by 25 percent against the franc.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Which nations use multiple exchange rates the most and why?

Accepted Answer

The answer of Which nations use multiple exchange rates the...

Question 17

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 18

Exchange rate controls

Accepted Answer

A)  Achieved prominence during the economic crises of the late 1930's 
B)  Were popular immediately after World War II 
C)  Are widely used by the developing nations 
D)  All of the above

Question 19

Table 15.1. The Market for Francs
 
-Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

Accepted Answer

A)  $0.15 per franc 
B)  $0.20 per franc 
C)  $0.25 per franc 
D)  $0.30 per franc

Question 20

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

Exam 15: Exchange-rate Systems and Currency Crises

Because there is no exchange stabilization fund under floating exchange rates,any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

Which exchange-rate system involves a "leaning against the wind" strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run?

The flexibility of floating rates may generate the problem of

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.

Under adjustable pegged exchange rates,if the rate of inflation in the United States exceeds the rate of inflation of its trading partners:

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.

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:

If the Japanese yen depreciates against other currencies in the exchange markets,this will:

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

To temporarily offset an appreciation in the dollar's exchange value,the Federal Reserve could the U.S.money supply which would promote a (an) in U.S.interest rates and a in investment flows to the United States.

The special drawing right is a currency basket of five major industrial country currencies.

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

If Uganda revalues its shilling by 20 percent and Burundi devalues its franc by 5 percent,the shillings exchange value will appreciate by 25 percent against the franc.

If Mexico fully dollarizes its economy,it agrees to

Which nations use multiple exchange rates the most and why?

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:

Exchange rate controls

Table 15.1. The Market for Francs -Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

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

Exam 15: Exchange-rate Systems and Currency Crises

Because there is no exchange stabilization fund under floating exchange rates,any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

Which exchange-rate system involves a "leaning against the wind" strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run?

The flexibility of floating rates may generate the problem of

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.

Under adjustable pegged exchange rates,if the rate of inflation in the United States exceeds the rate of inflation of its trading partners:

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.

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:

If the Japanese yen depreciates against other currencies in the exchange markets,this will:

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

To temporarily offset an appreciation in the dollar's exchange value,the Federal Reserve could ____ the U.S.money supply which would promote a (an) ____ in U.S.interest rates and a ____ in investment flows to the United States.

The special drawing right is a currency basket of five major industrial country currencies.

The purpose of currency devaluation is to cause the home country's exchange value to appreciate,thus reducing a balance of trade surplus.

If Uganda revalues its shilling by 20 percent and Burundi devalues its franc by 5 percent,the shillings exchange value will appreciate by 25 percent against the franc.

If Mexico fully dollarizes its economy,it agrees to

Which nations use multiple exchange rates the most and why?

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:

Exchange rate controls

Table 15.1. The Market for Francs -Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

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

To temporarily offset an appreciation in the dollar's exchange value,the Federal Reserve could the U.S.money supply which would promote a (an) in U.S.interest rates and a in investment flows to the United States.