Question 1

Which is one of the most serious international economic problems facing the world today?

Accepted Answer

All of the above are serious international economic problems facing the world today. Large volatility and disequilibria in exchange rates and frequent crises in emerging markets can lead to instability and uncertainty in the global economy. The rise of protectionism in developed countries and high structural unemployment in Western Europe can hinder international trade and limit economic growth. The restructuring problems of Eastern Europe and the former Soviet Union and the deep poverty of some of the poorest developing countries can also have significant economic impacts globally.

Question 2

The present international monetary system is a:

Accepted Answer

The present international monetary system is best described as a managed exchange rate system, where exchange rates are determined by market forces but with occasional intervention by central banks and governments to stabilize their currencies.

Question 3

Today,roughly how many members of the IMF opt for some form of exchange rate flexibility?

Accepted Answer

According to IMF's Foreign Exchange Policy Guidelines, about 50% of the IMF members opt for some form of exchange rate flexibility, which includes both floating and managed exchange rate regimes. The rest of the members maintain fixed exchange rate arrangements.

Question 4

Which of the following statements is false with regard to 11 countries of the European Monetary Union?

Accepted Answer

The answer of Which of the following statements is false...

Question 5

Which of the following statements about the gold standard is not true?

Accepted Answer

Countries were not able to return to pre-war parities after World War I due to the significant economic disruptions caused by the war. This led to a period of instability in the international monetary system known as the interwar period.

Question 6

During the 1960s the U.S.attempted to correct its balance of payments deficits by:

Accepted Answer

Ad hoc measures were used by the U.S. during the 1960s to address balance of payments deficits, including policies aimed at encouraging exports and discouraging imports without resorting to devaluation or significant import restrictions.

Question 7

Balance of payments adjustment under the gold standard is now believed to have occurred primarily through:

Accepted Answer

The answer of Balance of payments adjustment under the gold...

Question 8

The fundamental cause for the collapse of the Bretton Woods System was:

Accepted Answer

The lack of an adequate adjustment mechanism was the fundamental cause for the collapse of the Bretton Woods System. The fixed exchange rate system established by Bretton Woods was unable to respond to changing economic conditions and balance of payments deficits, leading to a lack of confidence and inadequate liquidity. However, while these were contributing factors to the collapse, they were not the fundamental cause.

Question 9

The Bretton Woods System was a:

Accepted Answer

The Bretton Woods System was a gold-exchange standard, which allowed countries to back their currencies with gold and U.S. dollars. The U.S. dollar was fixed to gold, while other countries' currencies were fixed to the U.S. dollar. This system was in place from 1944-1971.

Question 10

In the wake of the 2008-2009 global financial crisis the following is a potential economic problem facing the world today

Accepted Answer

A) Rising trade protection: 
One of the consequences of the global financial crisis was the rise of protectionist measures among countries. This has been evident in the form of increased tariffs, trade barriers, and anti-dumping measures. These measures make it harder for countries to trade with each other and can lead to a decrease in global economic growth.

B) A large U.S. balance of payments deficit:
The U.S. balance of payments deficit has been a longstanding issue, but the global financial crisis exacerbated this problem. The deficit reflects the fact that the U.S. is importing more goods and services than it is exporting, which leads to a drain on its foreign reserves. This in turn can destabilize the global economy if it leads to currency fluctuations and a loss of confidence in the dollar.

C) Deep poverty in many developing nations:
The global financial crisis hit developing nations particularly hard, as they were more vulnerable to economic shocks and had fewer resources to cushion the blow. As a result, many developing countries continue to struggle with poverty, which can lead to social and political instability. This, in turn, can further exacerbate global economic problems, as it can lead to conflict, migration, and other disruptions.

Question 11

Which of the following was a primary cause of the U.S.balance of payments deficits during the late 1960s?

Accepted Answer

The U.S. balance of payments deficits during the late 1960s were primarily caused by a combination of capital outflows (due to foreign investment opportunities), domestic inflation (which reduced the competitiveness of U.S. goods and services), and increased foreign competition (especially from Japan and Western Europe). All three factors contributed to a deterioration in the U.S. trade balance and a buildup of foreign liabilities.

Question 12

Which of the following did not represent an evolution of the Bretton Woods System?

Accepted Answer

Managed floating was not an evolution of the Bretton Woods System, but rather a departure from it. Under the Bretton Woods System, exchange rates were fixed and the U.S. dollar was the anchor currency. Managed floating allowed for exchange rates to fluctuate more freely based on market forces. The other options were all introduced as adjustments or additions to the Bretton Woods System. General Arrangements to Borrow increased resources available to the International Monetary Fund, standby arrangements provided short term financing to countries facing balance of payments problems, and Special Drawing Rights were introduced as a new reserve asset to supplement gold and currencies.

Question 13

The International Monetary Fund was initially established to manage

Accepted Answer

The International Monetary Fund was established in 1944 at the Bretton Woods Conference to manage the post-war international monetary system, which was based on the Gold-Exchange Standard. Under this system, currencies were pegged to the US dollar, which was in turn pegged to gold. The IMF was responsible for ensuring that countries maintained stable exchange rates and for providing loans to member countries experiencing balance of payments difficulties.

Question 14

The interwar period was characterized by:

Accepted Answer

The interwar period was characterized by chaotic conditions in international trade and finance due to a lack of coordination and the breakdown of the gold standard. The Great Depression and the rise of protectionism further worsened the situation. There was also a lack of stability in international capital flows during this time. Free trade, while ideal, was not a reality during the interwar period.

Question 15

On which of the following principles was the Bretton Woods System based on?

Accepted Answer

The Bretton Woods System was based on fixed exchange rates, currency convertibility, and free trade.

Question 16

The global financial crisis of 2008-2009 began as a

Accepted Answer

The global financial crisis of 2008-2009 was caused by a subprime mortgage crisis in the U.S. This crisis occurred when lenders gave loans to borrowers who were unable to repay them, resulting in housing foreclosures and a decline in the value of mortgage-backed securities. This eventually led to the collapse of several large financial institutions and a global recession.

Question 17

One reason for the collapse of the Bretton Woods system was

Accepted Answer

The U.S. balance of payments deficit was a major factor in the collapse of the Bretton Woods system. Under the system, other countries could exchange their U.S. dollar holdings for gold at a fixed rate, but the U.S. was running large trade deficits and printing more dollars to finance government spending, leading to a depletion of gold reserves and a loss of confidence in the system. This eventually led to the collapse of the fixed exchange rate system in 1971.

Question 18

The Bretton Woods System:

Accepted Answer

The Bretton Woods System allowed nations to change their par values when facing fundamental disequilibrium, which means that if a country faced a long-term imbalance in their balance of payments, they were allowed to adjust their exchange rate to address the problem. However, changes in par values had to be approved by the International Monetary Fund.

Question 19

The immediate cause for the collapse of the Bretton Woods System was:

Accepted Answer

All three factors mentioned (expectation of dollar devaluation, flight of capital, and European banks converting dollars into gold) contributed to the collapse of the Bretton Woods System. The combination of these factors led to a loss of confidence in the US dollar and the system as a whole, ultimately leading to the decision to abandon the fixed exchange rate regime.

Question 20

Which of the following is false with regard to the present international monetary system?

Accepted Answer

Special Drawing Rights (SDRs) are not the primary reserve asset in the current international monetary system. The primary reserve asset is still the U.S. dollar, followed by other major currencies such as the euro, yen, and pound sterling. SDRs are a supplementary reserve asset that was created by the International Monetary Fund (IMF) in 1969 to supplement existing reserve assets.

Quiz 21: The International Monetary System: Past,present,and Future