Deck 15: Early Monetary History: Ancient Times Through the End of the Gold Standard

Question 1

The textbook suggests that the performance of the international financial system under a particular order should be judged according to:

A) how fast economies following the order were able to grow and raise the standards of living of their citizens.
B) how fast international trade and investment expanded.
C) how well it promoted sound monetary policies and price stability.
D) All of the above.
E) None of the above.

Answer 1

how fast economies following the order were able to grow and raise the standards of living of their citizens.

Question 2

Great Britain ended up with a gold standard in the early nineteenth century because:

A) as master of the British mint, Sir Isaac Newton priced silver much higher relative to gold than the two precious metals were priced in other European countries.
B) certain political groups in Parliament wanted a very expansionary monetary policy.
C) parliament sought to limit the government's ability to print money.
D) most other major economies had already adopted the gold standard.

Answer 2

parliament sought to limit the government's ability to print money.

Question 3

Among the "rules of the game" of the gold standard is/are:

A) set a specific price of gold in terms of domestic currency.
B) prohibit the export of gold.
C) require all gold to be sold to the government for safekeeping.
D) All of the above.
E) None of the above.

Answer 3

set a specific price of gold in terms of domestic currency.

Question 4

If country A offers to convert its pesos at a rate of one peso per ounce of gold and country B stands ready to buy or sell gold at 10 dollars per ounce of gold, then the exchange rate between A's and B's currencies must be:

A) 1 peso = 10 dollars
B) 1 dollar = 10 pesos
C) 1 dollar = 1 peso
D) 10 pesos = 10 dollars

Question 5

The gold standard:

A) is a theoretical monetary system that never actually existed.
B) existed for only a few decades before World War I.
C) is what lies behind the present international monetary system.
D) functioned continuously for centuries before the Bretton Woods system was established in 1918.

Question 6

The gold standard period of 1870-1914 was characterized by:

A) perfectly stable price levels.
B) virtually no international capital movements.
C) growing trade and investment flows between countries.
D) All of the above.
E) None of the above.

Question 7

One of the many "rules of the game" of the gold standard order was:

A) all countries prohibit the movement of gold out of the country.
B) citizens be forced to sell all gold to the central bank, which would then issue new currency to pay for the gold and keep the gold in the vault to "back" the money in circulation.
C) silver be exchangeable for gold at a set ratio of the value of gold.
D) countries maintain money supplies that reflect the quantities of gold held by the central bank.

Question 8

The gold standard effectively came to an end in:

A) 1870, when the bimetallists gained prominence in the U.S.
B) 1971, when Richard Nixon suspended central bank sales of gold.
C) 1914, when World War I broke out.
D) 1944, when the Bretton Woods Conference was held.

Question 9

In terms of the trilemma, the gold standard effectively implied the choice of:

A) globalization and policy independence over a fixed exchange rate.
B) globalization and a fixed exchange rate over policy independence.
C) policy independence and a fixed exchange rate over globalization.
D) a fixed exchange rate over globalization and policy independence.

Question 10

The Tripartite Agreement between France, Great Britain, and the United States in 1937 contained many provisions that formed the basic order of:

A) the Bretton Woods order.
B) the gold standard.
C) the floating exchange rate system adopted in the 1970s.
D) the specie-flow mechanism.

Question 11

The Tripartite Agreement in 1937 was between:

A) Canada, Mexico, and the United States.
B) France, Great Britain, and the United States.
C) the three Bretton Woods countries.
D) all countries of the world and it dealt with using three commodities to back money.

Question 12

During the interwar years, the following happened:

A) Social and political upheavals resulted in some countries in Europe and Latin America adopting fascism or communism.
B) The classic Gold Standard was definitively abandoned.
C) The period ended with very high levels of unemployment in many countries.
D) All of the above.
E) None of the above.

Question 13

According to historians, World War I was fundamentally caused by:

A) militarism and the formation of military alliances.
B) floating exchange rates and their resulting effect on trade imbalances.
C) an act of terrorism, namely the assassination of Archduke Franz Ferdinand of Austria.
D) U.S. interference in European affairs.

Question 14

Which of the following statements is true about the post-World War I war reparations payments?

A) Allied countries, like France and Britain, were able to collect most of the reparations specified in the Treaty of Versailles.
B) Allied countries increasingly restricted imports so they could make their reparations payments.
C) Trade restrictions by the Allies made it impossible for Germany and its allies to make their required reparations payments.
D) All of the above.
E) None of the above.

Question 15

In the U.S., the interwar years were characterized by:

A) growing international economic isolation.
B) decreased protectionism and more free trade.
C) increasingly liberal immigration policies.
D) All of the above.
E) None of the above.

Question 16

Which of the following statements about U.S. immigration policy in the interwar years is true?

A) The Emergency Quota Act of 1921 increased the number of immigrants allowed into the U.S.
B) The Japanese Exclusion Act of 1924 kept the border fully open to Japanese immigrants.
C) The Immigration Act of 1924 limited immigration according to an ethnic quota system based on the ethnic composition of the U.S. population as tabulated in the 1890 census.
D) Immigration restrictions were gradually lifted, and European immigrants streamed into the country after World War I.

Question 17

Which of the following statements about the Smoot-Hawley Tariff of 1930 is true?

A) It was preceded by the Fordney-McCumber Tariff which doubled tariffs.
B) It grew larger because of the congressional practice of logrolling.
C) It was the highest average tariff ever enacted by the United States, increasing tariffs by 53 percent.
D) All of the above.
E) None of the above.

Question 18

Which of the following statements about the interwar period is true?

A) The Great Depression created political pressures for expansionary monetary and fiscal policies.
B) The nineteenth-century globalization of economic activity was sharply reversed.
C) The rules of the Gold Standard obligated central banks to contract the money supply when the country faced a trade deficit.
D) All of the above.
E) None of the above.

Question 19

During the Great Depression, the South American country of Brazil:

A) experienced increasing unemployment throughout the decade.
B) saw prices for its exports, such as, coffee, sugar, and cotton, rise.
C) expanded industrialization by substituting local production for imports.
D) All of the above.
E) None of the above.

Question 20

During the Great Depression:

A) some governments actively undervalued their currencies in order to give their exporters an advantage in international markets.
B) nearly all governments abandoned the Gold Standard.
C) Brazil engaged in expansionary fiscal and monetary policy.
D) All of the above.
E) None of the above.

Question 21

Franklin D. Roosevelt, the President of the U.S., enacted many radically new economic policies, including:

A) a Keynesian fiscal stimulus.
B) reinstatement of the nineteenth-century classical Gold Standard in place of the gold-reserve standard.
C) an even higher set of import tariffs than the already high Smoot-Hawley Tariff.
D) freely floating exchange rates.

Question 22

The Reciprocal Trade Agreements Act of 1934:

A) mandated retaliatory tariffs on manufactured products from all countries that imposed tariffs on U.S. products.
B) banned the fast track procedure in the case of trade legislation.
C) extended the Smoot-Hawley Tariff for another 20 years.
D) reduced the U.S. Congress' power to enact protectionist trade legislation.

Question 23

In assessing the Gold Standard in the interwar period, the only clear positive outcome that it brought was:

A) policy independence.
B) rapid economic growth.
C) increased globalization.
D) the absence of inflation.

Question 24

During the Great Depression, the trilemma led policymakers to choose:

A) policy independence and free trade over fixed exchange rates.
B) capital mobility and fixed exchange rates over policy independence.
C) policy independence over fixed exchange rates.
D) a return to globalization over policy independence and fixed exchange rates.