1. In terms of the exchange rate trilemma, under the Bretton Woods system from 1946 to 1973, countries:

A) maintained a fixed peg to the U.S. dollar, had monetary policy autonomy, but had to impose capital controls.

B) maintained a fixed peg to the U.S. dollar, eliminated capital controls, but had to sacrifice monetary policy autonomy.

C) had monetary policy autonomy, eliminated capital controls, but had to sacrifice a fixed peg to the U.S. dollar.

D) managed to implement all three policy options from the trilemma.

2. Under the Bretton Woods system of fixed exchange rates:

A) all countries pegged their currencies directly to gold.

B) The IMF made loans to promote growth in developing countries.

C) it was easy to maintain external balance.

D) the dollar was the main reserve currency.

E) None of the above

3. Suppose a country has a fixed exchange rate with capital mobility. What happens to the level of foreign reserves if domestic money demand falls by 10% and the backing ratio is 25%?

A) Foreign reserves do not fall.

B) Foreign reserves fall by 2.5%.

C) Foreign reserves fall by 25%.

D) Foreign reserves fall by 40%.

E) We do not have enough information

4. If a country uses a currency board to maintain the credibility of its exchange rate peg, what is the backing ratio?

A) It will depend on the quantity of money demanded.

B) 125%

C) 50%

D) 100%

E) We do not have enough information