Chapter 3

A) Widely divergent national monetary and fiscal policies among member nations B) Differential rates of inflation across member nations. C) Several unexpected economic shocks to member nations. D) all of the above 3.2 Contemporary Currency Regimes 1) The IMF's exchange rate regime classification identifies as the most rigidly fixed, and as the least fixed. A) exchange arrangements with no separate legal tender; independent floating B) crawling pegs, managed float C) currency board arrangements; independent floating D) pegged exchange rates within horizontal bands: exchange rates within crawling pegs 2) Which of the following correctly identifies exchange rate regimes from less fixed to more fixed? A) Independent floating, currency board arrangement, crawling pegs. B) Independent floating, currency board arrangement, managed float. C) Independent floating, crawling pegs, exchange arrangements with no separate legal tender. D) Exchange arrangements with no separate legal tender, currency board arrangement, crawling pegs. 3) A small economy country whose GDP is heavily dependent on trade with the United States could use a (an) exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate. A) pegged exchange rate with the United States B) pegged exchange rate with the Euro C) independent floating D) managed float exchange rate regime. 4) The United States currently uses a A) crawling peg B) pegged C) floating D) fixed 5) Based on the premise that, other things equal, countries would prefer a fixed exchange rate, which of the following statements is NOT true? A) Fixed rates provide stability in international prices for the conduct of trade. 5) Fixed exchange rate regimes necessitate that central banks maintain large quantities of international reserves for use in the occasional defense of the fixed rate. C) Fixed rates are inherently inflationary in that they require the country to follow loose monetary and fiscal policies