Question 1

Which of the following statements is true about the gold standard?

Accepted Answer

A)  Given a common gold standard,the value of any currency in units of any other currency was easy to determine.
B)  Establishing a gold standard seemed impractical as the volume of international trade expanded in the wake of the Industrial Revolution.
C)  A drawback of the gold standard was that it failed to provide a mechanism for achieving balance-of-trade equilibrium by all countries.
D)  Under the gold standard,when a country has a trade deficit,there will be a net flow of gold from the other countries to that country.
E)  The gold standard refers to the use of gold coins as a medium of exchange between countries involved in international trade.F) A) and B)
G) All of the above

Question 2

Since March 1973,currency exchange rates have become less volatile and more predictable than they were between 1945 and 1973.

Accepted Answer

A) True 
 B)False

Question 3

Briefly describe the pegged exchange rate regime.

Accepted Answer

Under a pegged exchange rate regime,a co...

Question 4

According to the agreement reached between the International Monetary Fund and the South Korean government in 1997,in return for funding,the South Koreans were required to

Accepted Answer

A)  adopt communist ideologies.
B)  reduce their imports by enforcing restrictive import licensing.
C)  open their economy to greater foreign competition.
D)  oppose the ideologies of the World Trade Organization.
E)  engage in competitive currency devaluation.F) B) and D)
G) A) and B)

Question 5

The International Monetary Fund can force countries to adopt the policies required to correct economic mismanagement.

Accepted Answer

A) True 
 B)False

Question 6

From mid-2008 through early 2009,the value of the dollar moderately increased against major currencies,despite the fact that the American economy was suffering from a serious financial crisis.Which of the following was a reason for this phenomenon?

Accepted Answer

A)  high real interest rates in the United States compared to any other developed region in the world sparked an inflow of funds into the country.
B)  U.S.assets were characterized by a high-risk,high-return payoff which prompted foreign investors to park their funds.
C)  foreign investors were excited at the possibility of high returns following the government bail-out of financial institutions.
D)  foreign investors put their money in low-risk U.S.assets such as low-yielding U.S.government bonds.
E)  foreign investors saw opportunities in the United States as the level of indebtedness had begun to reduce.F) D) and E)
G) A) and D)

Question 7

Which of the following describes a country when the income its residents earn from exports is equal to the money its residents pay to other countries for imports?

Accepted Answer

A)  currency crisis
B)  balance-of-trade equilibrium
C)  balance-of-payments deficit
D)  balance-of-trade surplus
E)  fiscal deficitF) A) and B)
G) B) and E)

Question 8

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Accepted Answer

A)  borrowing funds from the International Monetary Fund and the World Bank
B)  maintaining a trade surplus with foreign countries
C)  holding foreign currency reserves equal at the fixed exchange rate to at least 100 percent of the domestic currency issued
D)  importing more goods from foreign countries than it exports
E)  printing foreign currenciesF) All of the above
G) C) and D)

Question 9

The Democratic Republic of Bluen developed a permanent deficit in its balance of trade that could not be covered by domestic policy.Under the Bretton Woods system,this would require the

Accepted Answer

A)  country to import more than it exports.
B)  country to make its exports more expensive.
C)  International Monetary Fund to agree to a currency devaluation.
D)  government to expand monetary supply in the economy.
E)  government to undertake activities that led to exchange rate appreciation.F) C) and E)
G) A) and B)

Question 10

All countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold,according to the 1944

Accepted Answer

A)  Bretton Woods agreement.
B)  Washington Consensus.
C)  World Bank treaty.
D)  Group of Five treaty.
E)  United Nations agreement.F) B) and E)
G) D) and E)

Question 11

Which of the following statements is true about the changes in the world monetary system since March 1973?

Accepted Answer

A)  The value of the U.S.dollar has never seen a fall ever since.
B)  Exchange rates have become much more volatile.
C)  Exchange rates have become more predictable.
D)  The fixed rate system was adopted to calculate exchange rates.
E)  The European Monetary System as an institution has gained more prominence.F) All of the above
G) None of the above

Question 12

The Republic of Manoonistan recently moved to a pegged exchange rate system.Which of the following holds true for the Republic of Manoonistan's pegged exchange rate system?

Accepted Answer

A)  Adopting a pegged exchange rate regime increases inflationary pressures in the Republic of Manoonistan.
B)  It is necessary for a country whose currency is chosen for the peg to pursue a sound monetary policy.
C)  Pegged exchange rates are popular among many of the world's largest and developed nations.
D)  The value of a pegged currency falls when the reference currency rises in value.
E)  It is similar to a floating exchange rate system rather than a fixed system.F) A) and E)
G) C) and D)

Question 13

The international monetary system refers to a system to regulate fixed exchange rates before the introduction of the euro.

Accepted Answer

A) True 
 B)False

Question 14

The Republic of Argus has a fixed exchange rate regime.What would be the result if the Republic of Argus rapidly increased its money supply by printing currency?

Accepted Answer

A)  It would lead to an increase in the worth of the currency.
B)  The prices of imports would become more attractive in the country.
C)  The country's goods would be highly competitive in world markets.
D)  Trade surplus in the country would increase.
E)  It would lead to price deflation in the country.F) None of the above
G) A) and B)

Question 15

Some IMF economists argue that higher inflation rates might be good if the consequence is greater growth in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 16

In 2015,the country of Ringo (one of the poorest countries in Africa) requested a loan from the International Development Association (IDA) scheme of the World Bank.With reference to Ringo's loan application,which of the following observations about the IDA scheme of the World Bank is true?

Accepted Answer

A)  Money is raised through bond sales in the international capital market.
B)  Borrowers have up to 50 years to repay at an interest rate of less than 1 percent a year.
C)  IDA loans go only to European countries.
D)  Grants and interest-free loans are denied to governments of underdeveloped nations.
E)  The bank offers loans only to customers with a satisfactory credit rating.F) A) and D)
G) A) and E)

Question 17

In the face of unpredictable exchange rate movements,a firm should pursue strategies that reduce its economic exposure.

Accepted Answer

A) True 
 B)False

Question 18

The country of Ambos Republic defined its currency,ambos,as being equivalent to 16 grains of "fine" (pure) gold.Assuming that there are 480 grains in an ounce,the gold par value of the ambos is

Accepted Answer

A)  30.
B)  28.
C)  20.
D)  22
E)  14.F) A) and B)
G) All of the above

Question 19

Due to a variety of macroeconomic and microeconomic factors,the country of Broost suffered permanent adverse shifts in the demand for its products.Per the IMF's Articles of Agreement,Broost suffered from a

Accepted Answer

A)  competitive advantage.
B)  capital flight.
C)  fundamental disequilibrium.
D)  break-even point.
E)  diseconomies of scale.F) B) and D)
G) All of the above

Question 20

The objective of establishing the World Bank was to

Accepted Answer

A)  revive the gold standard.
B)  promote general economic development.
C)  control and manage the International Monetary Fund.
D)  promote a floating exchange rate system.
E)  approve large currency devaluations.F) B) and C)
G) A) and E)

Exam 11: The International Monetary System

The country of Ambos Republic defined its currency,ambos,as being equivalent to 16 grains of "fine" (pure) gold.Assuming that there are 480 grains in an ounce,the gold par value of the ambos is

Correct AnswerverifiedShow Answer

The Democratic Republic of Bluen developed a permanent deficit in its balance of trade that could not be covered by domestic policy.Under the Bretton Woods system,this would require the

Correct AnswerverifiedShow Answer

Due to a variety of macroeconomic and microeconomic factors,the country of Broost suffered permanent adverse shifts in the demand for its products.Per the IMF's Articles of Agreement,Broost suffered from a

Correct AnswerverifiedShow Answer

The International Monetary Fund can force countries to adopt the policies required to correct economic mismanagement.

Correct AnswerverifiedShow Answer

Which of the following statements is true about the changes in the world monetary system since March 1973?

Correct AnswerverifiedShow Answer

According to the agreement reached between the International Monetary Fund and the South Korean government in 1997,in return for funding,the South Koreans were required to

Correct AnswerverifiedShow Answer

The Republic of Argus has a fixed exchange rate regime.What would be the result if the Republic of Argus rapidly increased its money supply by printing currency?

Correct AnswerverifiedShow Answer

In the face of unpredictable exchange rate movements,a firm should pursue strategies that reduce its economic exposure.

Correct AnswerverifiedShow Answer

The international monetary system refers to a system to regulate fixed exchange rates before the introduction of the euro.

Correct AnswerverifiedShow Answer

In 2015,the country of Ringo (one of the poorest countries in Africa) requested a loan from the International Development Association (IDA) scheme of the World Bank.With reference to Ringo's loan application,which of the following observations about the IDA scheme of the World Bank is true?

Correct AnswerverifiedShow Answer

Which of the following describes a country when the income its residents earn from exports is equal to the money its residents pay to other countries for imports?

Correct AnswerverifiedShow Answer

From mid-2008 through early 2009,the value of the dollar moderately increased against major currencies,despite the fact that the American economy was suffering from a serious financial crisis.Which of the following was a reason for this phenomenon?

Correct AnswerverifiedShow Answer

Briefly describe the pegged exchange rate regime.

Correct AnswerverifiedUnder a pegged exchange rate regime,a co...View AnswerShow Answer

Which of the following statements is true about the gold standard?

Correct AnswerverifiedShow Answer

All countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold,according to the 1944

Correct AnswerverifiedShow Answer

Some IMF economists argue that higher inflation rates might be good if the consequence is greater growth in aggregate demand.

Correct AnswerverifiedShow Answer

The Republic of Manoonistan recently moved to a pegged exchange rate system.Which of the following holds true for the Republic of Manoonistan's pegged exchange rate system?

Correct AnswerverifiedShow Answer

Since March 1973,currency exchange rates have become less volatile and more predictable than they were between 1945 and 1973.

Correct AnswerverifiedShow Answer

How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible?

Correct AnswerverifiedShow Answer

The objective of establishing the World Bank was to

Correct AnswerverifiedShow Answer

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Under a pegged exchange rate regime,a co...
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