QUESTION Under a floating exchange rate regime, market forces have produced a volatile dollar exchange rate. Indicate whether the statement is true or false. ANSWER TRUE In recent history, the value of the dollar has been determined by both market forces and government intervention. Under a floating exchange rate regime, market forces have produced […]
QUESTION A country is said to be in balance-of-trade equilibrium when the income its residents earn from exports is greater than the money its residents pay to other countries for imports. Indicate whether the statement is true or false. ANSWER FALSE The great strength claimed for the gold standard was that it contained a […]
QUESTION According to the Bretton Woods agreement, if a currency became too weak to defend, a devaluation of up to 10 percent would be allowed without any formal approval by the International Monetary Fund. Indicate whether the statement is true or false. ANSWER TRUE An aspect of the Bretton Woods agreement was a commitment […]
QUESTION Under the gold standard, a country in balance-of-trade equilibrium will experience a net inflow of gold from other countries. Indicate whether the statement is true or false. ANSWER FALSE Under the gold standard, when a country has a trade surplus, there will be a net flow of gold from other countries into that […]
QUESTION If more dollars are needed to buy an ounce of gold than before, the implication is that the dollar is worth more. Indicate whether the statement is true or false. ANSWER FALSE The United States returned to the gold standard in 1934, raising the dollar price of gold from $20.67 per ounce to […]
QUESTION The major problem with the gold standard was that no multinational institution could stop countries from engaging in competitive devaluations. Indicate whether the statement is true or false. ANSWER TRUE The Bretton Woods conference participants wanted to avoid the senseless competitive devaluations of the 1930s, and they recognized that the gold standard would […]
QUESTION As the only currency that could be converted into gold, the British pound occupied a central place in the fixed exchange rate system. Indicate whether the statement is true or false. ANSWER FALSE The system of fixed exchange rates established at Bretton Woods worked well until the late 1960s, when it began to […]
QUESTION Under the fixed exchange rate system, the dollar could be devalued only if all countries agreed to simultaneously revalue against the dollar. Indicate whether the statement is true or false. ANSWER TRUE Devaluation of the dollar was no easy matter. Under the Bretton Woods provisions, any other country could change its exchange rates […]
QUESTION The architects of the Bretton Woods agreement wanted to avoid high unemployment, so they built the fixed exchange rate system to be highly inflexible. Indicate whether the statement is true or false. ANSWER FALSE Although monetary discipline was a central objective of the Bretton Woods agreement, it was recognized that a rigid policy […]
QUESTION Under the International Bank for Reconstruction and Development scheme, the World Bank offers low-interest loans to risky customers whose credit rating is often poor. Indicate whether the statement is true or false. ANSWER TRUE Under the International Bank for Reconstruction and Development (IBRD) scheme, money is raised through bond sales in the international […]
