Deck 19: International Monetary Arrangements

Question 1

The gold standard operated from approximately:

A) 1776-1861.
B) 1861-1946.
C) 1870-1914.
D) 1946-1973.
E) 1973-2007.

Answer 1

1870-1914.

Question 2

Under the gold standard, the _____ was the price of each currency in terms of gold.

A) government price
B) purchasing power parity
C) official parity price
D) terms of trade
E) price of imports

Answer 2

official parity price

Question 3

Under the gold standard:

A) each country's currency was defined in terms of gold.
B) each country's currency was backed by gold.
C) each country's currency was fixed in relation to all other currencies.
D) All of the above
E) None of the above

Answer 3

All of the above

Question 4

The gold standard is best described as:

A) a managed floating system.
B) a crawling float system.
C) a fixed exchange rate system.
D) a clean float.
E) a sterilized system.

Question 5

If a country were operating under a gold standard, a balance of payments deficit would lead to a _____ of gold and a(n) _____ in the money supply.

A) outflow, increase
B) inflow, increase
C) outflow, decrease
D) inflow, decrease
E) inflow, consistent

Question 6

If a country were operating under a gold standard, a balance of payments surplus would lead to an _____ of gold and a(n) _____ in the money supply.

A) outflow, increase
B) inflow, increase
C) outflow, decrease
D) inflow, decrease
E) inflow, consistent

Question 7

Assume that a country is operating with a gold standard and the domestic economy is growing rapidly. Which of the following effects would not be associated with this situation?

A) outflows of gold
B) a balance of payments deficit
C) a decline in the money supply
D) an increase in the money supply
E) a depreciation of the exchange rate

Question 8

The U.S. had no central bank from _____ to _____ .

A) 1776, 1813
B) 1837, 1913
C) 1861, 1865
D) 1865, 1890
E) 1907, 1919

Question 9

The major cost of a gold standard is the loss of a(n) _____ monetary policy.

A) expansionary
B) contractionary
C) discretionary
D) inflexible
E) consistent

Question 10

The gold standard:

A) allowed for independent monetary policy by each country.
B) automatically adjusted the money supply of each country to maintain external balance.
C) automatically adjusted the money supply of each country to maintain internal balance.
D) allowed for no changes in the monetary policy of each country.
E) allowed for exchange rate flexibility.

Question 11

Under the gold standard, which of the following statements was false?

A) Exchange rates did not change for long periods of time.
B) Businesses could trade and invest with little fear of exchange rate changes.
C) The price of each currency in terms of gold was fixed.
D) Inflation was not a serious problem.
E) Inflation was a serious economic problem.

Question 12

A gold standard would tend to stabilize prices in the _____ but not in the _____.

A) short run, long run
B) long run, short run
C) future, past
D) past, future
E) present, future

Question 13

The international system of fixed exchange rates in the early twentieth century was called:

A) the gold standard.
B) the gold exchange standard.
C) Mercantilism.
D) the inconvertible currency standard.
E) a currency board.

Question 14

The international monetary system that was in place between 1946 and the early 1970s was known as the:

A) Gold Standard.
B) International Monetary System.
C) IMF system.
D) Bretton Woods.
E) GATT system.

Question 15

The gold exchange standard is best described as:

A) an adjustable peg system.
B) a crawling float system.
C) a fixed exchange rate system.
D) a clean float.
E) a currency board

Question 16

The Bretton Woods system:

A) allowed countries to change their exchange rate when facing long-term current account imbalances.
B) allowed countries to change their exchange rate when facing short-term current account imbalances.
C) did not allow countries to change their exchange rate.
D) fell apart shortly after World War II.
E) was not related to the dollar.

Question 17

Which of the following is correct under the Bretton Woods system?

A) Gold was defined in terms of U.S. dollars and all other currencies were tied to the dollar.
B) This system required active intervention in the foreign-exchange market.
C) The U.S. government was not obligated to exchange dollars for gold at a fixed price.
D) The money supply of a country is controlled by the balance of payments.
E) The dollar was not an important currency.

Question 18

Under the gold exchange standard:

A) each country's currency was defined in terms of dollars.
B) the U.S. dollar was backed by gold.
C) each country's currency was fixed in relation to all other currencies.
D) All of the above
E) None of the above

Question 19

Which of the following was not true with respect to the Bretton Woods system?

A) It was created at a conference in 1944.
B) The number of countries originally involved was 44.
C) All currencies were fixed in relation to the U.S. dollar.
D) The U.S. dollar was just another currency in this system.
E) Exchange rates changed daily.

Question 20

The IMF:

A) provides technical assistance to member countries concerning balance of payments imbalances.
B) makes loans to non-member countries for economic development.
C) is the world's central bank.
D) is a private bank.
E) provides loans to cover political risk.

Question 21

Which organization is responsible for making loans to countries that have major balance of payments imbalances?

A) the World Bank
B) the Bank for International Settlements
C) the International Monetary Fund
D) the United Nations
E) the BIS

Question 22

In the Bretton Woods system, countries with balance of payments _____ could be forced to correct these imbalances but countries with _____ could not be forced to correct these imbalances.

A) surpluses, deficits
B) recessions, deficits
C) deficits, surpluses
D) deficits, deflation
E) balances, deficits

Question 23

Special Drawing Rights are issued by the:

A) World Bank.
B) Inter American Development Bank.
C) Federal Reserve.
D) IMF.
E) BIS

Question 24

Which of the following was a period for which there was no official international monetary system?

A) 1870-1914
B) 1914-1946
C) 1946-1971
D) 1960-1970
E) 1980-1996

Question 25

The U.S. dollar surplus in world markets during the 1960s was due in part to:

A) an unused dollar.
B) freely floating exchange rates.
C) an undervalued dollar.
D) U.S. current account surpluses.
E) an overvalued dollar

Question 26

The gold exchange standard effectively ended:

A) in 1971.
B) when the U.S. no longer would redeem dollars for gold.
C) when the U.S. devalued its currency in terms of gold.
D) All of the above
E) None of the above

Question 27

Which organization is responsible for making long-term development loans to countries?

A) the World Bank
B) the Bank for International Settlements
C) the International Monetary Fund
D) the United Nations
E) UNIDO

Question 28

Since _____ the world has been without an "official" international monetary system.

A) 1776
B) 1870
C) 1913
D) 1946
E) 1971

Question 29

All of the following exchange-rate systems require central banks to hold international reserves except:

A) freely floating exchange rates.
B) fixed exchange rates.
C) adjustable pegged exchange rates.
D) managed floating exchange rates.
E) exchange control systems.

Question 30

Which of the following arrangements does not require central banks to hold international reserves?

A) freely floating exchange rates
B) fixed exchange rates
C) adjustable pegged exchange rates
D) managed floating exchange rates
E) exchange control systems

Question 31

Which of the following is not true with respect to volatile exchange rates?

A) Volatile exchange rates reduce the volume of international trade.
B) Volatile exchange rates increase the prices of traded goods.
C) Volatile exchange rates make international trade more risky.
D) Volatile exchange rates make FDI more risky.
E) Volatile exchange rates are not a problem for governments.

Question 32

Exchange-rate volatility:

A) benefits international trade by making it less risky.
B) reduces international trade by making it more risky.
C) reduces the costs for firms engaged in international trade.
D) increases the benefits associated with international trade.
E) reduces international investment.

Question 33

Which of the following international monetary systems had only a few rules and virtually no cooperation?

A) the gold standard
B) Bretton Woods
C) the current system
D) the Louvre accord
E) the dollar system

Question 34

The current international monetary system has _____ rules and virtually _____ cooperation.

A) many, little
B) few, much
C) few, little
D) few, no
E) no, no

Question 35

The current international system pursued by the U.S. can be viewed as:

A) a discretionary and non-cooperating system.
B) a discretionary and cooperating system.
C) a non-discretionary and non-cooperating system.
D) a non-discretionary and cooperating system.
E) an inflexible and non-cooperating system.

Question 36

The gold standard implies:

A) that the trade deficit or surplus affects the money supply.
B) long-run price stability.
C) short-run price instability.
D) all of the above
E) none of the above

Question 37

Under the gold standard, businesses could trade and invest with little fear of changes in the exchange rate.

Question 38

The gold standard operated from about 1870 to 1914.

Question 39

The gold standard operated from about 1944 to 1971.

Question 40

Under a gold standard system, the money supply is influenced by the balance of payments.

Question 41

Under a gold standard system, a balance of payments deficit would entail an outflow of gold and an increase in the money supply.

Question 42

The U.S. had no central bank from 1837 to 1913.

Question 43

Under the gold standard, each country's central bank was required to buy and sell its currency at the official parity price.

Question 44

Under the gold standard, each country's central bank was required to buy and sell its currency for dollars.

Question 45

Under the gold standard, a balance of payments deficit at the current fixed exchange rate meant that gold flowed out of the country and the money supply decreased.

Question 46

Under the gold standard, a balance of payments surplus at the current fixed exchange rate meant that gold flowed out of the country and the money supply decreased.

Question 47

Under the gold standard, countries generally sterilized central bank intervention in the foreign exchange market.

Question 48

In a gold standard system, a balance of payments deficit would tend to lead to a lower price level and a fall in GDP.

Question 49

The major cost associated with the Gold Standard is that the adjustment of the price level and output to an external imbalance is completely automatic.

Question 50

A gold standard will tend to stabilize prices in the short run but not in the long run.

Question 51

A benefit of the gold standard was that it provided an anchor and long-run price stability for a country.

Question 52

A benefit of the gold standard was that internal balance was automatically achieved by the system.

Question 53

Under the gold standard, the U.S. defined the dollar in terms of gold and other countries fixed their currencies to the dollar.

Question 54

The Bretton Woods system was created in 1974 by an agreement between 120 countries.

Question 55

Under the gold exchange standard the U.S. defined the dollar in terms of gold and other countries fixed their currencies to the dollar.

Question 56

Another name for the gold standard is the gold exchange standard.

Question 57

Under the Bretton Woods system, gold was defined in terms of U.S. dollars and all other currencies were tied to the dollar.

Question 58

The Bretton Woods system required active intervention in the foreign-exchange market.

Question 59

In the Bretton Woods system the U.S. government was obligated to exchange dollars for gold at a fixed price.

Question 60

The gold exchange standard was also called the Bretton Woods system.

Question 61

The purpose of the Bretton Woods system was to provide an international monetary system that featured flexible exchange rates.

Question 62

Under the gold exchange standard exchange rates were fixed and governments were free to pursue a monetary policy consistent with internal balance.

Question 63

A benefit of the gold exchange standard was that external balance was automatically achieved by the system.

Question 64

The major cost associated with the gold exchange standard is that the adjustment of the price level and output to an external imbalance is completely automatic.

Question 65

Under the gold exchange standard, countries could not sterilize intervention in the foreign-exchange market.

Question 66

The IMF was designed to provide loans to countries that had persistent external imbalances.

Question 67

If a country borrowed reserves from the IMF to finance an external imbalance, the IMF usually imposed contractionary policies as a condition for the loan.

Question 68

Part of the demise of the Bretton Woods system was related to the fact that the U.S. gold stock had become small relative to the potential claims on that stock.

Question 69

The end of the Bretton Woods system occurred when the U.S. stated that it would no longer redeem gold for dollars.

Question 70

Pegging the nominal exchange rate does not guarantee that the real exchange rate will be constant.

Question 71

The dollar is the world's dominant currency.

Question 72

A clean float is a situation where the government is fairly indifferent to the exchange rate.

Question 73

A clean float allows a country to focus on external balance with little concern over internal balance considerations.

Question 74

A clean float is an exchange rate system where the government does not try to influence the exchange rate.

Question 75

Under a clean float, policy mixes can cause the exchange rate to change and harm one or more sectors of the domestic economy.

Question 76

Volatile exchange rates make international trade more risky for firms.

Question 77

In the current environment participants in the world economy are being forced to implicitly forecast exchange rates whether they want to or not.

Question 78

The optimal international monetary system is influenced by the degree to which countries are willing to cooperate with one another.

Question 79

A fixed exchange-rate system will work better if countries will cooperate more with one another.

Question 80

The current international monetary environment has virtually no rules.