QUESTION Which of the following is a characteristic of the floating exchange rate regime? A. It allows for automatic trade balance adjustments. B. The use of monetary policy by the government is restricted. C. It allows for greater monetary discipline. D. It limits the destabilizing effects of exchange rate speculation. E. It eliminates volatility and […]
QUESTION Which of the following explains the rise of the dollar against most major currencies in the late 1990s, even though the United States was still running a significant balance-of-payments deficit? A. Reduced government intervention in the foreign exchange market B. Increased foreign investments in U.S. financial assets C. Low real interest rates in the […]
QUESTION Which of the following is an argument for a fixed exchange rate system? A. Governments can contract their money supply without worrying about the need to maintain parity. B. Trade balance adjustments do not require the intervention of the International Monetary Fund. C. It ensures that governments do not expand the monetary supply too […]
QUESTION What was the effect of the Marshall Plan? A. The United States lent money directly to European nations to help them rebuild their economies. B. Member countries of the International Monetary Fund were free to engage in competitive currency devaluations. C. The World Bank lent funds to reconstruct the war-torn economies of Europe. D. […]
QUESTION Which of the following is true of monetary contraction in a fixed exchange rate system? A. It requires low interest rates. B. It increases the demand for money. C. It puts downward pressure on a fixed exchange rate. D. It leads to an inflow of money from abroad. E. It can lead to high […]
QUESTION Which of the following is true of the International Bank for Reconstruction and Development (IBRD) scheme of the World Bank? A. Resources to fund IBRD loans are raised through subscriptions from wealthy members. B. The interest rate charged by the World Bank is higher than the commercial banks’ market rate. C. Borrowers have to […]
QUESTION Under the Bretton Woods system, if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy, this would require the: A. country to import more than it exports. B. country to make its exports more expensive. C. International Monetary Fund to agree to a currency […]
QUESTION The collapse of the fixed exchange rate system has been traced to the: A. U.S. macroeconomic policy package of 1965-1968. B. inflexibility of the fixed exchange rate system that led to high unemployment. C. Marshall Plan, under which the United States lent money heavily to European nations. D. failure of the International Monetary Fund […]
QUESTION Which of the following is an argument for a floating exchange rate system? A. Each country should be allowed to choose its own inflation rate. B. Speculation in exchange rates dampens the growth of international trade and investment. C. Unpredictability of exchange rate movements makes business planning difficult. D. Removal of the obligation to […]
QUESTION Under the U.S. macroeconomic policy package of 1965-1968, President Lyndon Johnson backed an increase in U.S. government spending that was financed by: A. the sale of gold reserves. B. borrowing from the International Monetary Fund. C. an increase in the money supply. D. an increase in taxes. E. selling bonds in the international capital […]
