QUESTION Most of the International Monetary Fund’s loan activities since the mid-1970s have been targeted toward developing nations typically because: A. developed nations are not willing to enact certain macroeconomic policies in return for money. B. developing nations are more than twice as likely to experience financial crises as developed nations. C. it does not […]
QUESTION Critics of floating exchange rates claim that trade deficits are determined by the: A. balance between savings and investment in a country. B. external value of the currency of a country. C. exchange rates of other currencies. D. valuations made by International Monetary Fund and the World Bank. E. mechanism of competitive currency devaluation. […]
QUESTION According to the critics of the International Monetary Fund (IMF), how should the problem of moral hazard exhibited by banks be resolved? A. The IMF should use a “one-size-fits-all” approach to macroeconomic policy. B. The IMF should establish a mechanism for accountability. C. The IMF should free all banks from the obligation of financial […]
QUESTION In comparison to a floating exchange rate regime, a fixed exchange rate system is characterized by: A. smoother trade balance adjustments. B. increased destabilizing effects of exchange rate speculation. C. greater autonomy in terms of monetary policy. D. higher monetary discipline. E. greater exchange rate uncertainty and volatility. ANSWER D
QUESTION The International Monetary Fund has been criticized for: A. its lack of a “one-size-fits-all” approach to macroeconomic policy. B. encouraging moral hazard among banks. C. its lack of power and authority. D. using external experts to gain knowledge about a country. E. keeping its operations open to outside scrutiny. ANSWER B
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 […]
