QUESTION When the Bretton Woods participants established the World Bank, the need to lend money to third-world nations was foremost in their minds. Indicate whether the statement is true or false. ANSWER FALSE When the Bretton Woods participants established the World Bank, the need to reconstruct the war-torn economies of Europe was foremost in […]
QUESTION Since March 1973, currency exchange rates have become less volatile and more predictable than they were between 1945 and 1973. Indicate whether the statement is true or false. ANSWER FALSE Since March 1973, currency exchange rates have become much more volatile and less predictable than they were between 1945 and 1973. This volatility […]
QUESTION The Bretton Woods system could work only as long as the U.S. inflation rate remained low and the United States did not run a balance-of-payments deficit. Indicate whether the statement is true or false. ANSWER TRUE The Bretton Woods system could work only as long as the U.S. inflation rate remained low and […]
QUESTION When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a pegged exchange rate regime. Indicate whether the statement is true or false. ANSWER FALSE When the foreign exchange market determines the relative value of a currency, we say that the country is […]
QUESTION Under a pegged exchange rate regime, a country will peg the value of its currency to that of a major currency, so that if the reference currency rises in value, its own currency rises too. Indicate whether the statement is true or false. ANSWER TRUE Under a pegged exchange rate regime, a country […]
QUESTION A pegged exchange rate means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate. Indicate whether the statement is true or false. ANSWER TRUE Many of the world’s developing nations peg […]
QUESTION The disadvantage of a pegged exchange rate regime is that it aggravates inflationary pressures in a country. Indicate whether the statement is true or false. ANSWER FALSE Under a pegged exchange rate regime, a country will peg the value of its currency to that of a major currency so that, for example, as […]
QUESTION In a fixed exchange rate system, the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency if it depreciates too rapidly against an important reference currency. Indicate whether the statement is true or false. ANSWER FALSE A dirty float (as opposed […]
QUESTION Under a floating exchange rate system, a country’s ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity. Indicate whether the statement is true or false. ANSWER FALSE It is argued that under a fixed system, a country’s ability to expand […]
QUESTION Given a common gold standard, the value of any currency in units of any other currency (the exchange rate) was easy to determine. Indicate whether the statement is true or false. ANSWER TRUE Pegging currencies to gold and guaranteeing convertibility is known as the gold standard. By 1880, most of the world’s major […]
