Question 1

Can all of the following three conditions:
(1)fixed exchange rate,
(2)free international flow of capital,and
(3)independent monetary policy
Be satisfied simultaneously?
 Why?

Accepted Answer

The answer of Can all of the following three conditions:
(1)fixed...

Question 2

The Chinese renminbi is currently pegged to the US dollar at a rate of 8.28 to 1.The renminbi is considered to be undervalued (that is the exchange rate should be lower).Graphically illustrate the external adjustment mechanism.What happens to the Chinese foreign exchange reserves?

Accepted Answer

The answer of The Chinese renminbi is currently pegged to...

Question 3

Suppose that the British pound is pegged to gold at £6 per ounce and one ounce of gold is worth FF12.The exchange rate is FF1.8/£ and you have FF11,000.How much profit can you make?
 (Assume zero shipping costs).

Accepted Answer

The answer of Suppose that the British pound is pegged...

Question 4

It is said that the gold-exchange system was programmed to collapse in the long run.To satisfy the growing need for reserves,the United States had to run balance-of-payments deficits continuously.Yet,if the United States ran perennial balance-of-payments deficits,it would eventually impair the public confidence in the dollar.This dilemma was known as the
A) Triffin paradox
B) Triffin dilemma
C) Mundell paradox
D) Mundell dilemma

Accepted Answer

The answer of It is said that the gold-exchange system...

Question 5

Bretton Woods system:
A) is an example of a fixed exchange rate regime
B) is an example of a flexible exchange rate regime
C) gave birth to the introduction of the Euro
D) was used to smooth transition from bimetallism to the classical gold standard

Accepted Answer

The Bretton Woods system was a fixed exchange rate regime established in 1944, in which currencies were pegged to the US dollar, and the US dollar was linked to gold at a fixed rate. This system was in place until 1971, when the US dollar was no longer convertible to gold, leading to the collapse of the Bretton Woods system.

Question 6

The Argentine peso was pegged to the US dollar at a rate of 1 to 1 until January 17,2002.Argentina experienced trade deficits in prior to the collapse of the currency board.Graphically illustrate the external adjustment mechanism.

Accepted Answer

The answer of The Argentine peso was pegged to the...

Question 7

Before World War I,$20.67 was needed to buy one ounce of gold and FF 310.00 would also buy one ounce of gold.What was the exchange rate between the French franc and the US dollar?
A) FF0.0667/$
B) FF14.9976/$
C) FF6407.7/$
D) $6407.7/FF

Accepted Answer

FF310/$20.67 = FF 14.9976/$

Question 8

Before World War I,GBP 2.2474 was needed to buy one ounce of gold.FF 310.00 would also buy one ounce of gold.What was the exchange rate between the French franc and the British Pound?

Accepted Answer

The answer of Before World War I,GBP 2.2474 was needed...

Quiz 2: International Monetary System

Can all of the following three conditions: (1)fixed exchange rate, (2)free international flow of capital,and (3)independent monetary policy Be satisfied simultaneously? Why?

The Chinese renminbi is currently pegged to the US dollar at a rate of 8.28 to 1.The renminbi is considered to be undervalued (that is the exchange rate should be lower).Graphically illustrate the external adjustment mechanism.What happens to the Chinese foreign exchange reserves?

Suppose that the British pound is pegged to gold at £6 per ounce and one ounce of gold is worth FF12.The exchange rate is FF1.8/£ and you have FF11,000.How much profit can you make? (Assume zero shipping costs).

Bretton Woods system:

The Argentine peso was pegged to the US dollar at a rate of 1 to 1 until January 17,2002.Argentina experienced trade deficits in prior to the collapse of the currency board.Graphically illustrate the external adjustment mechanism.

Before World War I,$20.67 was needed to buy one ounce of gold and FF 310.00 would also buy one ounce of gold.What was the exchange rate between the French franc and the US dollar?

Before World War I,GBP 2.2474 was needed to buy one ounce of gold.FF 310.00 would also buy one ounce of gold.What was the exchange rate between the French franc and the British Pound?