1. The International Monetary Fund was established at the Bretton Woods conference to

Multiple Choice

• fund the initiatives of the United Nations.
• promote general economic development in the world.
• maintain order in the international monetary system.
• establish gold standards across the world.

2.

If a country increases its money supply rapidly under a fixed exchange rate regime, then

Multiple Choice

• imports will become less attractive in that country.
• the trade deficit would get smaller in that country.
• the country will face high levels of price inflation.
• demand for the country's products will increase in world markets.

3. A ________blank rate means the value of the currency is fixed relative to a reference currency and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

Multiple Choice

• floating exchange
• currency board
• fixed exchange
• pegged exchange

4.

Speculative buying and selling of currencies can create volatile movements in exchange rates under the present foreign exchange system.

Group startsTrue or False

5. A banking crisis refers to

Multiple Choice

• low interest rates offered by the banks.
• loss of confidence in the banking system.
• high reserve requirements on the banks.
• high levels of trade deficit in a country.

6. A currency board can issue additional domestic notes and coins only when there are foreign exchange reserves to back it.

Group startsTrue or False

7. Minimal government deficits are an underlying cause of a foreign debt crisis.

Group startsTrue or False

8. A managed float is the exchange rate policy where the government

Multiple Choice

• decides the exchange rate at which a country's currency is traded.
• forms an agreement with other countries to fix the exchange rate.
• intervenes in the exchange rate system only in a limited way.
• does not intervene in the country's exchange rate system.

9. The idea that each country should be allowed to choose its own inflation rate is called the ________blank argument.

Multiple Choice

• trade balance
• rigid economy
• monetary autonomy
• monetary discipline

10. The result of the Bretton Woods agreement was that fixed exchange rates were desirable. However, most countries preferred a floating exchange rate instead.

Group startsTrue or False

11. A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a ________blank rate.

Multiple Choice

• managed floating
• fixed exchange
• free float exchange
• flexible exchange

12. The Bretton Woods agreement implemented a system of ________blank exchange rates.

Multiple Choice

• floating
• fixed
• currency board
• managed floating

13. A ________blank occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate.

Multiple Choice

• banking crisis
• currency crisis
• foreign debt crisis
• crisis of the World Bank

14. The United Arab Emirates (UAE) bases the valuation of its currency on the U.S. dollar. The value of the UAE's currency is changed based on the changes in the value of the dollar. This is an example of a ________blank exchange rate system.

Multiple Choice

• currency board
• managed float
• pegged
• free float

15. A country has adopted a dirty-float system over a clean-float system. In doing so the country has agreed to

Multiple Choice

• allow its currency to be fixed to the U.S. dollar.
• allow the central bank to maintain the value of its currency.
• allow the process of dollarization to occur.
• let inflation take hold to stabilize its market.

16 Under the Jamaica agreement, floating rates were declared unacceptable.

Group startsTrue or False

17. A country in a state of fundamental disequilibrium suffers from

Multiple Choice

• persistent trade surpluses.
• low unemployment and increased economic output.
• an overproduction of goods.
• permanent adverse shifts in the demand for its products.

18 A pegged exchange rate means the value of a currency is flexible against a set of currencies.

Group startsTrue or False

19. Increasingly, the International Monetary Fund (IMF) has been acting as the macroeconomic police of the world economy by

Multiple Choice

• using inflationary monetary policies that keep the market balanced.
• enacting policies that cause a sharp increase in demand, thereby driving additional manufacturing.
• calling for increased government spending in member countries.
• insisting that countries seeking significant borrowings adopt IMF-mandated macroeconomic policies.

20. Advocates say that fixed exchange rates can help a country deal with economic crises.

Group startsTrue or False