Question 1

The British economist who played a crucial role at the Bretton Woods conference was _____ .

Accepted Answer

John Maynard Keynes was the British economist who played a crucial role at the Bretton Woods conference. He advocated for a new system of international monetary management which he believed would prevent another world depression from occurring.

Question 2

Which of the following is NOT an example of the way states' economies have become more closely linked through globalization?

Accepted Answer

The closure of national parks and museums due to a government shutdown is not directly related to the global economy or globalization.

Question 3

The study of the relationship between geography and the economic conditions and behavior of states that define their levels of production, trade, and consumption of goods and services is the field of _____.

Accepted Answer

The field of geo-economics studies the relationship between geography and economic conditions and behavior of states, including production, trade, and consumption of goods and services. Geo-politics focuses more on the political power dynamics within and between states, monetary policy is the management of a country's monetary supply and interest rates by a central bank, and globalization refers to the integration of economies and societies across borders.

Question 4

The _____ and the _____ were created to bolster financial and monetary relations under the Bretton Woods system.

Accepted Answer

The World Bank and the International Monetary Fund (IMF) were both created in 1944 under the Bretton Woods system to promote financial stability and monetary cooperation among member countries. The Liberal International Economic Order was a term used to describe the post-World War II economic system that was based on free trade and reduced trade barriers. GATT (General Agreement on Tariffs and Trade) was a multilateral agreement on trade that preceded the World Trade Organization (WTO). Therefore, choices A and B are incorrect. The WTO was not created under the Bretton Woods system, so choice D is also incorrect.

Question 5

Which of the following is NOT a reason that the states involved in Bretton Woods were able to come to such a far-reaching level of agreement?

Accepted Answer

The states involved in Bretton Woods did not share a common currency and domestic economic strategy, since they represented a diverse range of countries with different currencies and economic systems. Instead, they agreed to a system of fixed exchange rates and a stable international monetary system. The other three options (A, C, and D) helped facilitate the agreement at Bretton Woods.

Question 6

Foreign direct investment refers to

Accepted Answer

Foreign direct investment involves either purchasing substantial shares of a foreign company's stock or setting up production facilities in another country. It is a strategy used by multinational corporations to expand their activities beyond their home country and gain access to new markets, resources, and talent.

Question 7

The financial procedure that is used to calculate the values of currencies and credits when capital is transferred across borders through trade, investment, foreign aid, and loans is called _____.

Accepted Answer

The financial procedure described is known as the international monetary system, which involves the exchange of currencies and credits between countries. Options A, C, and D do not accurately describe this process.

Question 8

What is the outcome of very high inflation or hyperinflation?

Accepted Answer

When a nation experiences hyperinflation, the value of their currency drastically decreases to the point where it becomes practically worthless. This happens as confidence in the currency erodes and people begin to lose faith in its ability to hold its value. As a result, individuals and businesses may turn to alternative currencies or even bartering to conduct transactions. This can cause severe economic and social disruption, including high unemployment, decreased productivity, and political instability.

Question 9

The Bretton Woods system was based on what system of exchange rates?

Accepted Answer

The Bretton Woods system was a fixed-but-adjustable system of exchange rates, meaning that while exchange rates were nominally fixed to the US dollar, they could be adjusted within a narrow margin depending on market conditions.

Question 10

What was the result of the U.S. change away from a policy of dollar convertibility?

Accepted Answer

The U.S. change away from a policy of dollar convertibility resulted in currency exchanges moving to a system of floating exchange rates. This meant that exchange rates were determined by the market forces of supply and demand, instead of being fixed to the value of the U.S. dollar.

Question 11

The dominant economic approach during the Bretton Woods system, which combined open international markets with domestic state intervention to attain such goals as full employment and social welfare is called _____.

Accepted Answer

The description of combining open international markets with domestic state intervention to attain goals like full employment and social welfare aligns with the concept of embedded liberalism. Mercantilism and fixed exchange rates are not accurate descriptions of the dominant economic approach during the Bretton Woods system. Commercial liberalism may align with open international markets, but it does not include domestic state intervention to achieve social welfare goals.

Question 12

Approximately how many financial crises have occurred in the world since the demise of the Bretton Woods system?

Accepted Answer

According to a study by Carmen Reinhart and Kenneth Rogoff, there have been 147 international financial crises since the collapse of the Bretton Woods system in 1971.

Question 13

A floating exchange rate means that

Accepted Answer

A floating exchange rate means that the value of a currency is determined by market forces of supply and demand, rather than government intervention, allowing for the currency to fluctuate according to changes in the global economy.

Question 14

The least globalized nations also tend to be the

Accepted Answer

The statement mentions that the least globalized nations "tend to be the least developed and most autocratic," indicating a lack of economic and political development. Answer choices A and D are not supported by this information, while choice B is not mentioned and is not necessarily true.

Question 15

Advocates of _____ policy believe that by controlling the growth of the money supply, governments can regulate their nations' economic activity and control inflation.

Accepted Answer

The policy described in the question is the monetary policy, which involves controlling the growth of the money supply in order to regulate the economy and control inflation. The other options listed are not directly related to this particular policy.

Question 16

_____ is an economic theory advocating free markets and the removal of barriers to the flow of trade and capital as a path to prosperity.

Accepted Answer

Commercial liberalism is an economic theory advocating for free markets and removing barriers to trade and capital flows as a way to promote prosperity. Globalization is a broader term that encompasses economic, societal, and cultural integration across borders. Bretton Woods was a financial system established after World War II. Arbitrage refers to the practice of buying and selling assets to take advantage of price discrepancies in different markets.

Question 17

Even in a world with floating exchange rates, states have some ability to control the value of their currency.  What is an advantage of having a weak currency?

Accepted Answer

Exporting industries benefit from a weak currency as their goods are cheaper for foreigners to purchase. With a weak currency, the cost of producing goods in a country becomes lower and thus the goods become more affordable for foreign buyers. This can boost the exports of a country and help its domestic industries.

Question 18

A government can control the value of its currency by

Accepted Answer

All of these options are true ways that a government can control the value of its currency. By increasing or decreasing the supply of money, a government can influence the exchange rate of its currency. By adjusting interest rates, a government can also control the flow of money in and out of the country, affecting the exchange rate. Avoiding the practice of arbitrage, where investors take advantage of price differences in different markets, can also help stabilize the currency's value.

Question 19

Governmental policy tools for managing economies including taxation and spending is called _____ .

Accepted Answer

Fiscal policy refers to the use of government spending and taxation to influence the economy. Monetary policy refers to central bank actions related to the money supply and interest rates, while exchange rate refers to the value of one currency relative to another.

Question 20

The lessons learned from the global economic collapse of the 1930s included

Accepted Answer

All three statements are true and reflect important lessons learned from the global economic collapse of the 1930s. The fixed exchange rate regime proved unsustainable and led to speculative attacks on currencies and subsequent devaluation. The shift to a more flexible exchange rate regime was necessary but also introduced new challenges and instability.

Quiz 10: The Globalization of International Finance