International Business, 12e (Hill)
1) The international monetary system refers to the institutional arrangements that govern exchange
rates.
2) The gold standard called for fixed exchange rates against the U.S. dollar.
3) The fixed exchange rate system established at Bretton Woods failed due to speculative
pressures on the U.S. dollar.
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4) Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.
5) Market forces have produced a stable dollar exchange rate under a floating exchange rate
regime.
6) The agreement reached at Bretton Woods established the International Monetary Fund (IMF)
and the World Bank.
7) After the agreement reached at Bretton Wood, the dollar was the only currency that could be
convertible into gold.
8) Implementing a fixed exchange rate regime increases the price inflation in countries.
9) World Bank offers low–interest loans to risky customers whose credit rating is often poor.
10) Fixed exchange rates lead to speculation and uncertainty in the value of currencies.
11) Adopting a pegged exchange rate regime increases the inflationary pressures in a country.
12) A country that introduces a currency board commits itself to converting its domestic currency
on demand into another currency at a fixed exchange rate.
13) Interest rates adjust automatically under a strict currency board system.
14) The International Monetary Fund’s original function was to provide a pool of money from
which members could borrow in the short term.
15) The IMF does not expect governments to meet any obligations except to pay back the money it
borrows.
16) In 2002, the IMF stepped in to help stabilize the value of the Brazilian currency on foreign
exchange markets by lending it foreign currency. This constitutes a foreign debt crisis.
17) Moral hazard arises when people behave recklessly without regard for the consequences.
18) The current system of foreign exchange is a mixed system of government intervention and
speculative activity.
19) Firms cannot utilize the forward exchange market when they are faced with uncertainty about
the future value of currencies.
20) An effective business strategy to reduce economic exposure is to contract out
high-value-added manufacturing.
21) The ________ refers to the institutional arrangements that govern exchange rates.
A) World Bank
B) international monetary system
C) currency exchange
D) gold standard
22) A ________ means the value of a currency is fixed relative to a reference currency.
A) pegged exchange rate
B) floating exchange rate
C) managed float system
D) fixed exchange rate
23) When a country tries to hold the value of its currency within some range against an important
reference currency such as the U.S. dollar without adopting a formal pegged rate, it is referred to as
a
A) gold standard.
B) pegged float.
C) dirty float.
D) currency peg.
24) The amount of a currency needed to purchase one ounce of gold was referred to as the
A) golden rule.
B) gold standard.
C) pegged gold value.
D) gold par value.
25) A country is said to be in balance-of-trade equilibrium when
A) the income its residents earn from exports is equal to the money its residents pay to other
countries for imports.
B) it produces all the goods needed for domestic consumption.
C) the income its residents earn from imports is equal to the money its residents pay to other
countries for exports.
D) it produces all the goods needed for exportation.
26) The world‘s four major trading currencies, the Japanese yen, the U.S. dollar, the British pound,
and the European Union’s euro, are all free to float against each other. What is this an example of?
A) pegged exchange rate regime
B) floating exchange rate regime
C) managed–float system
D) fixed exchange rate regime