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 […]
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 […]
