47) The agreement reached at Bretton Woods established the
A) International Monetary Fund.
B) World Economic Forum.
C) United Nations.
D) International Atomic Energy Agency.
48) Which of the following statements is true of the Bretton Woods agreement?
A) All countries agreed to fix the value of their currency in terms of gold under the agreement.
B) The system accepted the British pound as the official reference currency against gold.
C) The agreement established a floating system of monetary exchange.
D) Two multinational institutions, the World Economic Forum and WTO, were formed under the
agreement.
49) The World Bank was established at the at Bretton Woods conference to
A) establish an international monetary system.
B) promote general economic development.
C) establish the gold standard across the world.
D) fund the initiatives of the United Nations.
50) Identify the currency that was convertible to gold under the Bretton Woods system.
A) pound
B) yen
C) euro
D) dollar
51) What will happen if a country increases its money supply rapidly under a fixed exchange rate
regime?
A) Imports will become less attractive in that country.
B) The country will face negative inflation.
C) The trade deficit would widen in that country.
D) The country’s products will become more attractive in world markets.
52) Which of the following is a disadvantage of using a rigid policy of fixed exchange rates?
A) It is likely to create high unemployment in some cases.
B) It will lead to inflationary economies across the world.
C) It is likely to bring about trade wars between nations.
D) It will instigate competitive devaluations and intense competition.
53) What was the World Bank’s initial mission?
A) implementing a rigid fixed exchange rate regime
B) promoting the gold standard across the world
C) providing low–interest loans to help finance the building of Europe’s economy
D) implementing a flexible fixed exchange rate regime
54) Which of the following arguments is in favor of floating exchange rates?
A) A country’s ability to expand or contract its money supply should be limited by the need to
maintain exchange rate parity.
B) Maintaining balance of trade equilibrium is not in the best interest of a country.
C) Countries can isolate themselves from uncertainties when they trade using a mutually agreed on
exchange rate.
D) Governments can restore monetary control by removing the obligation to maintain exchange
rate parity.
55) Advocates of a ________ argue that removal of the obligation to maintain exchange rate parity
would restore monetary control to a government.
A) fixed exchange rate regime
B) dirty–float system
C) floating exchange rate regime
D) pegged exchange rate regime
56) The monetary autonomy argument is supported by the advocates of
A) a dirty-float system.
B) fixed exchange rates.
C) pegged exchange rates.
D) floating exchange rates.
57) Supporters of floating exchange rates
A) argue that floating rates help adjust trade imbalances.
B) argue that floating rates lead to a more stable world monetary system.
C) claim that trade deficits are determined by the balance between savings and investment in a
country.
D) claim that trade deficits are not determined by the external value of currency.
58) The monetary autonomy argument holds that
A) each country should be allowed to choose its own inflation rate.
B) inflation is beneficial to a country’s economy and growth.
C) inflation is detrimental to a country’s economy and growth.
D) countries should restrict inflation based on the global standards.
59) Which of the following arguments is against the use of fixed exchange rates?
A) Monetary discipline is the most important determinant of a strong economy.
B) Each country has the freedom to choose its own inflation rate.
C) Market speculation can cause fluctuations in exchange rates.
D) Governments are likely to expand the monetary supply far too rapidly due to political pressures.
60) Which of the following arguments strengthen the idea of floating exchange rates?
A) External agencies should not interfere in the monetary policies of a country.
B) Trade deficits can be corrected through changes in exchange rates.
C) Changes in exchange rates will not impact the trade balance in a country.
D) Governments should act in ways to minimize the uncertainty in monetary markets.
61) Which of the following is an exchange rate policy where the exchange rate is determined
completely by market forces?
A) managed float
B) fixed peg
C) free float
D) currency board
62) Which of the following is the exchange rate policy where the government intervenes in the
exchange rate system only in a limited way?
A) managed-float
B) fixed peg
C) free-float
D) currency board
63) Under a ________ exchange rate regime, a country will attach the value of its currency to that
of a major currency.
A) managed-float
B) pegged
C) free-float
D) currency board
64) Which of the following statements is true of pegged exchange rates?
A) A pegged exchange rate allows a country‘s currency to be determined by market forces.
B) A pegged exchange rate weakens the monetary discipline of a country.
C) Pegged exchange rates are popular among many of the world‘s smaller nations.
D) Adopting a pegged exchange rate regime increases inflationary pressures in a country.
65) A country that introduces a currency board commits itself to converting its domestic currency
on demand into
A) another currency at a fixed exchange rate.
B) gold or silver at a fixed exchange rate.
C) gold or silver at a floating exchange rate.
D) another currency at a floating exchange rate.
66) Under a currency board system
A) inflation rates are maintained at a high level.
B) countries issue domestic notes at will.
C) interest rates remain constant.
D) the government lacks the ability to set interest rates.