Question 1

The international monetary system can be defined as the institutional framework within which

Accepted Answer

A)  international payments are made.
B)  movement of capital is accommodated.
C)  exchange rates among currencies are determined.
D)  all of the optionsE) B) and D)
F) B) and C)

Question 2

Prior to the 1870s,both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents.Suppose that the dollar was pegged to gold at $30 per ounce,the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver,and the German mark pegged to silver at 1 mark per ounce of silver.What would the exchange rate between the U.S.dollar and German mark be under this system?

Accepted Answer

A)  1 German mark = $2
B)  1 German mark = $0.50
C)  1 German mark = $3
D)  1 German mark = $1E) All of the above
F) B) and C)

Question 3

Benefits from adopting a common European currency include

Accepted Answer

A)  reduced transaction costs.
B)  elimination of exchange rate risk.
C)  increased price transparency,which promotes Europe-wide competition.
D)  all of the optionsE) A) and D)
F) B) and C)

Question 4

Following the introduction of the euro,the national central banks of the euro-12 nations

Accepted Answer

A)  disbanded.
B)  formed the ESCB,which is analogous to the Federal Reserve System in the U.S.
C)  continue to perform important functions in their jurisdictions.
D)  formed the ESCB,which is analogous to the Federal Reserve System in the U.S.,and continue to perform important functions in their jurisdictions.E) A) and D)
F) A) and B)

Question 5

In the 1850s the French franc was valued by both gold and silver,under the official French ratio which equated a gold franc to a silver franc 15½ times as heavy.At the same time,the gold from newly discovered mines in California poured into the market,depressing the value of gold.As a result,

Accepted Answer

A)  the franc effectively became a silver currency.
B)  the franc effectively became a gold currency.
C)  silver became overvalued under the French official ratio.
D)  the franc effectively became a silver currency and silver became overvalued under the French official ratio.E) A) and C)
F) A) and B)

Question 6

The core of the Bretton Woods system was the

Accepted Answer

A)  World Bank.
B)  IMF.
C)  United Nations.
D)  Interstate Commerce Commission.E) B) and C)
F) A) and B)

Question 7

Under a flexible exchange rate regime,governments can retain monetary policy independence because the external balance will be achieved by

Accepted Answer

A)  the exchange rate adjustments.
B)  the price-specie flow mechanism.
C)  the Triffin paradox.
D)  none of the optionsE) None of the above
F) B) and C)

Question 8

Prior to the peso crisis,Mexico depended on foreign portfolio capital to finance its economic development.This foreign capital influx

Accepted Answer

A)  caused higher domestic inflation.
B)  led to an overvalued peso.
C)  helped Mexico's trade balances.
D)  caused higher domestic inflation and led to an overvalued peso.E) All of the above
F) B) and D)

Question 9

The euro zone is remarkably comparable to the United States in terms of

Accepted Answer

A)  population size.
B)  GDP.
C)  international trade share.
D)  all of the optionsE) A) and B)
F) B) and C)

Question 10

During the period between World War I and World War II,the political reality was characterized by

Accepted Answer

A)  halfhearted attempts and failure to restore the gold standard.
B)  political instabilities and bank failures.
C)  panicky flights of capital across borders.
D)  all of the optionsE) A) and D)
F) None of the above

Question 11

Suppose that Britain pegs the pound to gold at the market price of £6 per ounce,and the United States pegs the dollar to gold at the market price of $36 per ounce.If the official exchange rate between pounds and U.S.dollars is $5 = £1.Which of the following trades is profitable?

Accepted Answer

A)  Start with £100 and trade for $500 at the official exchange rate.Redeem the $500 for 13.89 ounces of gold.Trade the gold for £83.33.
B)  Start with $100 and buy gold.Sell the gold for £16.67.Sell the pounds at the official exchange rate.
C)  Start with £100 and buy gold.Sell the gold for $600.
D)  Start with $500 and trade for £100 at the official exchange rate.Redeem the £100 for  162/3162 / 3162/3  ounces of gold.Trade the gold for $600. E) A) and D)
F) A) and B)

Question 12

Put the following in correct date order:

Accepted Answer

A)  Jamaica Agreement,Bretton Woods Agreement,Smithsonian Agreement.
B)  Smithsonian Agreement,Bretton Woods Agreement,Jamaica Agreement.
C)  Bretton Woods Agreement,Smithsonian Agreement,Jamaica Agreement.
D)  Bretton Woods Agreement,Jamaica Agreement,Smithsonian Agreement.E) B) and D)
F) A) and D)

Question 13

Suppose that Britain pegs the pound to gold at six pounds per ounce,whereas the exchange rate between pounds and U.S.dollars is $1 = £5.What would an ounce of gold be worth in U.S.dollars?

Accepted Answer

A)  $0.42
B)  $1.20
C)  $1.22
D)  $1.74E) A) and B)
F) A) and C)

Question 14

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the following chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Accepted Answer

A)  To "fix" the exchange rate at $1.80 = £1.00,the Federal Reserve could use contractionary monetary policy to shift the demand curve to the left.
B)  To "fix" the exchange rate at $1.80 = £1.00,the U.S.government could use contractionary fiscal policy to shift the demand curve to the left.
C)  The British Government could use fiscal or monetary policy to shift the supply curve to the right to fix the exchange rate to $1.80 = £1.00.
D)  all of the optionsE) B) and D)
F) A) and C)

Question 15

The first full-fledged gold standard

Accepted Answer

A)  was not established until 1821 in Great Britain,when notes from the Bank of England were made fully redeemable for gold.
B)  was not established until 1780 in the United States,when notes from the Continental Army were made fully redeemable for gold.
C)  was established in 986 during the Han dynasty in China.
D)  none of the optionsE) A) and B)
F) A) and C)

Question 16

Under the Bretton Woods system,

Accepted Answer

A)  the U.S.dollar was the only currency that was fully convertible to gold; other currencies were not directly convertible to gold.
B)  all currencies of member states were fully convertible to gold.
C)  all currencies of member states were fully convertible to gold or silver.
D)  none of the optionsE) A) and C)
F) C) and D)

Question 17

Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 per ounce.This implies an exchange rate of $1.75 per pound.If the current market exchange rate is $1.80 per pound,how would you take advantage of this situation? Hint: assume that you have $350 available for investment.

Accepted Answer

A)  Start with $350.Buy 10 ounces of gold with dollars at $35 per ounce.Convert the gold to £200 at £20 per ounce.Exchange the £200 for dollars at the current rate of $1.80 per pound to get $360.
B)  Start with $350.Exchange the dollars for pounds at the current rate of $1.80 per pound.Buy gold with pounds at £20 per ounce.Convert the gold to dollars at $35 per ounce.
C)  both of the options
D)  none of the optionsE) B) and D)
F) C) and D)

Question 18

The Mexican peso crisis is significant in that

Accepted Answer

A)  it is perhaps the first serious international financial crisis touched off by cross-border flight of portfolio capital.
B)  selling by international portfolio managers had a highly destabilizing,contagious effect on the world financial system.
C)  it provides a cautionary tale that as the world's financial markets are becoming more integrated,this type of contagious financial crisis is likely to occur more often.
D)  all of the optionsE) A) and C)
F) A) and B)

Question 19

The Asian Currency Crisis

Accepted Answer

A)  happened just prior to the Mexican peso crisis.
B)  turned out to be far more serious than the Mexican peso crisis in terms of the extent of contagion.
C)  was limited to Asian currencies.
D)  was almost over before anyone outside the Pacific Rim noticed.E) C) and D)
F) All of the above

Question 20

The Bretton Woods system ended in

Accepted Answer

A)  1945.
B)  1973.
C)  1981.
D)  2001.E) C) and D)
F) All of the above

Exam 1: International Monetary System

Correct Answer
verified

Suppose that Britain pegs the pound to gold at the market price of £6 per ounce,and the United States pegs the dollar to gold at the market price of $36 per ounce.If the official exchange rate between pounds and U.S.dollars is $5 = £1.Which of the following trades is profitable?

Correct Answer
verified

Under the Bretton Woods system,

Correct Answer
verified

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the following chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Correct Answer
verified

The Bretton Woods system ended in

Correct Answer
verified

The Asian Currency Crisis

Correct Answer
verified

The euro zone is remarkably comparable to the United States in terms of

Correct Answer
verified

Correct Answer
verified

Prior to the peso crisis,Mexico depended on foreign portfolio capital to finance its economic development.This foreign capital influx

Correct Answer
verified

The first full-fledged gold standard

Correct Answer
verified

Under a flexible exchange rate regime,governments can retain monetary policy independence because the external balance will be achieved by

Correct Answer
verified

Following the introduction of the euro,the national central banks of the euro-12 nations

Correct Answer
verified

The core of the Bretton Woods system was the

Correct Answer
verified

Put the following in correct date order:

Correct Answer
verified

The international monetary system can be defined as the institutional framework within which

Correct Answer
verified

During the period between World War I and World War II,the political reality was characterized by

Correct Answer
verified

In the 1850s the French franc was valued by both gold and silver,under the official French ratio which equated a gold franc to a silver franc 15½ times as heavy.At the same time,the gold from newly discovered mines in California poured into the market,depressing the value of gold.As a result,

Correct Answer
verified

Benefits from adopting a common European currency include

Correct Answer
verified

The Mexican peso crisis is significant in that

Correct Answer
verified

Suppose that Britain pegs the pound to gold at six pounds per ounce,whereas the exchange rate between pounds and U.S.dollars is $1 = £5.What would an ounce of gold be worth in U.S.dollars?

Correct Answer
verified

Exam 1: International Monetary System

Correct AnswerverifiedShow Answer

Suppose that Britain pegs the pound to gold at the market price of £6 per ounce,and the United States pegs the dollar to gold at the market price of $36 per ounce.If the official exchange rate between pounds and U.S.dollars is $5 = £1.Which of the following trades is profitable?

Correct AnswerverifiedShow Answer

Under the Bretton Woods system,

Correct AnswerverifiedShow Answer

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the following chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Correct AnswerverifiedShow Answer

The Bretton Woods system ended in

Correct AnswerverifiedShow Answer

The Asian Currency Crisis

Correct AnswerverifiedShow Answer

The euro zone is remarkably comparable to the United States in terms of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Prior to the peso crisis,Mexico depended on foreign portfolio capital to finance its economic development.This foreign capital influx

Correct AnswerverifiedShow Answer

The first full-fledged gold standard

Correct AnswerverifiedShow Answer

Under a flexible exchange rate regime,governments can retain monetary policy independence because the external balance will be achieved by

Correct AnswerverifiedShow Answer

Following the introduction of the euro,the national central banks of the euro-12 nations

Correct AnswerverifiedShow Answer

The core of the Bretton Woods system was the

Correct AnswerverifiedShow Answer

Put the following in correct date order:

Correct AnswerverifiedShow Answer

The international monetary system can be defined as the institutional framework within which

Correct AnswerverifiedShow Answer

During the period between World War I and World War II,the political reality was characterized by

Correct AnswerverifiedShow Answer

In the 1850s the French franc was valued by both gold and silver,under the official French ratio which equated a gold franc to a silver franc 15½ times as heavy.At the same time,the gold from newly discovered mines in California poured into the market,depressing the value of gold.As a result,

Correct AnswerverifiedShow Answer

Benefits from adopting a common European currency include

Correct AnswerverifiedShow Answer

The Mexican peso crisis is significant in that

Correct AnswerverifiedShow Answer

Suppose that Britain pegs the pound to gold at six pounds per ounce,whereas the exchange rate between pounds and U.S.dollars is $1 = £5.What would an ounce of gold be worth in U.S.dollars?

Correct AnswerverifiedShow Answer

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