QUESTION Which of the following holds true for a pegged exchange rate system? A. Adopting a pegged exchange rate regime increases inflationary pressures in a country. B. It is necessary for a country whose currency is chosen for the peg to pursue a sound monetary policy. C. Pegged exchange rates are popular among many of […]
QUESTION Which of the following arises when people behave recklessly because they know they will be saved if things go wrong? A. Systemic risk B. Moral hazard C. Ethical dilemma D. Tragedy of the commons E. Risk compensation ANSWER B
QUESTION Adopting which kind of an exchange rate regime moderates inflationary pressures in a country? A. Nominal B. Pegged C. Pure “free float” D. Clean float E. Real ANSWER B
QUESTION What can a country introduce if it wants to commit itself to converting its domestic currency on demand into another currency at a fixed exchange rate? A. A free-float exchange rate system B. A clean-float exchange rate system C. A pure-float exchange rate system D. A currency board E. A gold standard ANSWER […]
QUESTION Which of the following is a drawback of the currency board system? A. The ease with which governments can set and manipulate interest rates acts as a limitation. B. Higher domestic inflation rates compared to the inflation rate in the country to which the currency is pegged can make the currency uncompetitive. C. The […]
QUESTION Which of the following is a reason why Great Britain and the United States could finance their deficits by borrowing private money since the early 1970s? A. Rapid development of global capital markets B. Shortage of International Monetary Fund grants available for disbursal C. High interest rate charged by the International Monetary Fund D. […]
QUESTION Which of the following statements is true about a currency board system? A. Under a strict currency board system, interest rates adjust automatically based on the supply and demand of domestic currency. B. To convert domestic currency on demand into another currency, a currency board takes grants from the International Monetary Fund. C. This […]
QUESTION How does a country that introduces a currency board make its commitment to converting its domestic currency on demand into another currency at a fixed exchange rate credible? A. By borrowing funds from the International Monetary Fund and the World Bank B. By maintaining a trade surplus with foreign countries C. By holding foreign […]
QUESTION Which of the following is an implication of a currency crisis? A. It occurs due to a sharp appreciation in the value of a currency. B. It forces authorities to block large volumes of international currency reserves. C. A country in currency crisis is not eligible for loans from the International Monetary Fund. D. […]
QUESTION Which of the following is true of a banking crisis? A. It leads to individuals and companies withdrawing their deposits from banks. B. It results in a sharp appreciation in the value of the currency. C. It happens due to a decline in domestic borrowing. D. It occurs due to asset price deflation. E. […]
