QUESTION In a floating exchange rate, the relative value of a currency: A. is more predictable and less volatile. B. is determined by market forces. C. changes infrequently only under a specific set of circumstances. D. is set against other currencies at some mutually agreed on exchange rate. E. does not depend on the free […]
QUESTION Which of the following refers to a system under which a country’s currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value? A. Fixed float B. Clean float C. […]
QUESTION Which of the following statements is true about the various exchange rate systems? A. In a fixed exchange rate system, the value of a currency is adjusted according to the day to day market forces. B. In a clean float, the central bank of a country will intervene in the foreign exchange market to […]
QUESTION It can be very difficult for a small country to maintain a peg against another currency if capital is flowing out of the country and foreign exchange traders are speculating against the currency. Indicate whether the statement is true or false. ANSWER TRUE Many countries operate with only a nominal peg and in […]
QUESTION The 1944 Bretton Woods conference created two major international institutions that play a role in the international monetary system—the International Monetary Fund (IMF) and the: A. United Nations. B. European Union. C. World Trade Organization. D. World Bank. E. G20. ANSWER D
QUESTION Some IMF economists argue that higher inflation rates might be good if the consequence is greater growth in aggregate demand. Indicate whether the statement is true or false. ANSWER TRUE Some economists in the International Monetary Fund are now arguing that higher inflation rates might be a good thing, if the consequence is […]
QUESTION In which kind of exchange rate system are the values of a set of currencies set against each other at some mutually agreed on exchange rate? A. Clean float B. Floating C. Fixed D. Dirty-float E. Pegged ANSWER C
QUESTION The International Monetary Fund can force countries to adopt the policies required to correct economic mismanagement. Indicate whether the statement is true or false. ANSWER FALSE The International Monetary Fund (IMF) cannot force countries to adopt the policies required to correct economic mismanagement. While a government may commit to taking corrective action in […]
QUESTION Which of the following refers to the gold standard? A. Pegging currencies to gold and guaranteeing convertibility B. Conducting international trade by physically exchanging gold C. The most valuable currency in the world at any given point in time D. The common global standard of gold quality to be maintained E. The quality of […]
QUESTION The activities of the International Monetary Fund have declined after the collapse of the Bretton Woods system in 1973. Indicate whether the statement is true or false. ANSWER FALSE The activities of the International Monetary Fund (IMF) have expanded over the past 30 years. By 2014, the IMF had 188 members, 52 of […]
