ECO 410 Week 3 Quiz – Strayer
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Quiz 2 Chapter 3 and 4
Chapter 3
The International Monetary System
Multiple Choice
1) Under
the gold standard of currency exchange that existed from 1879 to 1914, an ounce
of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore,
the exchange rate of pounds per dollar under this fixed exchange regime was:
A)
£4.8665/$.
B)
£0.2055/$.
C)
always changing because the price of gold was always changing.
D)
unknown because there is not enough information to answer this question.
2) World
War I caused the suspension of the gold standard for fixed international
exchange rates because the war:
A) cost
too much money.
B)
interrupted the free movement of gold.
C)
lasted too long.
D) used
gold as the main ingredient in armament plating.
3) The
post WWII international monetary agreement that was developed in 1944 is known
as the:
A)
United Nations.
B)
League of Nations.
C) Yalta
Agreement.
D)
Bretton Woods Agreement.
4)
Another name for the International Bank for Reconstruction and Development is:
A) the
Recon Bank.
B) the
European Monetary System.
C) the
Marshall Plan.
D) the
World Bank.
5) The
International Monetary Fund (IMF):
A) in
recent years has provided large loans to Russia, South Korea, and Brazil.
B) was
created as a result of the Bretton Woods Agreement.
C) aids
countries with balance of payment and exchange rate problems.
D) is
all of the above.
6) Which
of the following led to the eventual demise of the fixed currency exchange rate
regime worked out at Bretton Woods?
A)
widely divergent national monetary and fiscal policies among member nations
B)
differential rates of inflation across member nations
C)
several unexpected economic shocks to member nations
D) all
of the above
7) Which
of the following statements is NOT true?
A) The
Gold Standard Era was characterized by growing openness in trade, but limited
capital mobility.
B) The
time period between world wars 1 and 2 (the inter war Years) witnessed
significant reductions in trade barriers and a rapid acceleration in
international trade.
C) The
Bretton Woods Era (post WWII) realized the increasing benefits of open
economies. Furthermore, trade was increasingly dominated by capital.
D) In
fact, all of the above statements are true.
True/False
1) Under
the terms of Bretton Woods, countries tried to maintain the value of their
currencies to within 1% of a hybrid security made up of the U.S. dollar,
British pound, and Japanese yen.
2)
Members of the International Monetary Fund may settle transactions among
themselves by transferring Special Drawing Rights (SDRs).
3)
Today, the United States has been ejected from the International Monetary Fund
for refusal to pay annual dues.
4) From
the time of its creation through July 2012, the euro peaked versus the USD in
April 2008 at around $1.60/€
Essay
1) Most
Western nations were on the gold standard for currency exchange rates from 1876
until 1914. Today we have several different exchange rate regimes in use, but
most larger economy nations have freely floating exchange rates today and are
not obligated to convert their currency into a predetermined amount of gold on
demand. Currently several parties still call for the "good old days"
and a return to the gold standard. Develop an argument as to why this is a good
idea.
Multiple Choice
1) Since
2009 the IMF's exchange rate regime classification system uses a "de facto
classification" methodology. Under this system, a country that has given
up their own sovereignty over monetary
policy
is considered to have:
A) a
residual agreement.
B) hard
pegs.
C) soft
pegs.
D)
floating arrangements.
2) Since
2009 the IMF's exchange rate regime classification system uses a "de facto
classification" methodology. Under this system, countries with "fixed
exchange rates" are considered to have:
A) a
residual agreement.
B) soft
pegs.
C) hard
pegs.
D)
floating arrangements.
3) A
small economy country whose GDP is heavily dependent on trade with the United
States could use a(n) ________ exchange rate regime to minimize the risk to
their economy that could arise due to unfavorable changes in the exchange rate.
A)
pegged exchange rate with the United States
B)
pegged exchange rate with the Euro
C)
independent floating
D)
managed float
4) Since
2009 the IMF's exchange rate regime classification system uses a "de facto
classification" methodology. Under this system, currencies that are
predominantly market-driven are considered to be:
A) soft
pegs.
B) hard
pegs.
C)
floating arrangements.
D) a
residual agreement.
True/False
1) The
euro is an example of a rigidly fixed system, acting as a single currency for
its member countries. However, the euro itself is an independently floating
currency against all other currencies.
2)
Although the contemporary international monetary system is typically referred
to as a "floating regime," it is clearly not the case for the
majority of the world's nations.
Essay
1) The
mobility of international capital flows is causing emerging market nations to
choose between a free-floating currency exchange regime and a currency board
(or taken to the limit, dollarization). Describe how each of the regimes would
work and identify at least two likely economic results for each regime.
Multiple Choice
1) Based
on the premise that, other things equal, countries would prefer a fixed
exchange rate, which of the following statements is NOT true?
A) Fixed
rates provide stability in international prices for the conduct of trade.
B) Fixed
exchange rate regimes necessitate that central banks maintain large quantities
of international reserves for use in the occasional defense of the fixed rate.
C) Fixed
rates are inherently inflationary in that they require the country to follow
loose monetary and fiscal policies.
D)
Stable prices aid in the growth of international trade and lessen exchange rate
risks for businesses.
2) Which
of the following is NOT an attribute of the "ideal" currency?
A)
monetary independence
B) full
financial integration
C)
exchange rate stability
D) All
are attributes of an ideal currency.
3) The
authors discuss the concept of the "Impossible Trinity" or the
inability to achieve simultaneously the goals of exchange rate stability, full
financial integration, and monetary independence. If a country chooses to have
a pure float exchange rate regime, which two of the three goals is a country
most able to achieve?
A)
monetary independence and exchange rate stability
B)
exchange rate stability and full financial integration
C) full
financial integration and monetary independence
D) A
country cannot attain any of the exchange rate goals with a pure float exchange
rate regime.
True/False
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