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c.
expansionary; decrease
d.
expansionary; increase
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 12:54 AM
DATE MODIFIED:
7/7/2016 12:55 AM
135. If a central bank was to prevent its currency from appreciating, it would likely adopt a (an) ______ monetary policy
to ______ the domestic interest rate, thus strengthening its currency.
a.
contractionary; decrease
b.
contractionary; increase
c.
expansionary; decrease
d.
expansionary; increase
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 12:55 AM
DATE MODIFIED:
7/7/2016 12:57 AM
136. Which of the following is a hybrid exchange rate system that contains elements of both fixed exchange rates and
floating exchange rates?
a.
adjustable pegged exchange rates
b.
managed floating exchange rates
c.
crawling pegged exchange rates
d.
all of the above
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
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TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
137. Under a system of managed floating exchange rates, central banks intervene in the foreign exchange market to
a.
moderate long run movements in exchange rates
b.
reinforce long run movements in exchange rates
c.
moderate short run fluctuations in exchange rates
d.
reinforced short run fluctuations in exchange rates
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
138. Proponents of a freely floating exchange rate system maintain that it is superior to a fixed exchange rate system
because
a.
the balance of payments adjusts continuously to exchange-rate movements
b.
governments can establish independent monetary and fiscal policies
c.
disorderly exchange rate movements can disrupt trade and investment patterns
d.
floating exchange rates operate under simplified institutional arrangements
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
139. Proponents of a fixed exchange rate system maintain that it is superior to a freely floating exchange rate system
because it
a.
keeps inflation under control
b.
provides a simple and clear exchange-rate target
c.
provides continuous adjustment in the balance of payments
d.
helps prevent disorderly exchange rate movements that can disrupt trade
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ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
140. For the United States, its current exchange rate system is generally considered to be a
a.
freely floating exchange rate system
b.
managed floating exchange rate system
c.
crawling pegged exchange rate system
d.
currency board system
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
141. Countries such as Bolivia and Costa Rica have adopted crawling pegged exchange rates. Under this system, a
country
a.
makes small, frequent changes in the par value of its currency to moderate balance of payments disequilibrium
b.
allows its currency to float freely in the foreign exchange market in the short run and long run
c.
maintains a system of completely fixed exchange rates
d.
smooths fluctuations in exchange rates over the long run, but not in the short run
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
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DATE MODIFIED:
142. Sources of currency crisis for emerging countries have included all of the following except
a.
weak banks and financial systems
b.
governmental budget deficits financed by inflation
c.
governments prone to being overthrown by force
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Currency Crises
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:48 AM
DATE MODIFIED:
7/7/2016 1:50 AM
143. For developing countries, currency boards and dollarization are intended to
a.
convince speculators that the exchange rate is unchangeable
b.
promote confidence in the soundness of the nation’s money supply
c.
arrest any tendencies in an economy toward inflation
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:50 AM
DATE MODIFIED:
7/7/2016 1:52 AM
144. For developing countries, efforts to prevent speculation and currency crises have included
a.
controls on capital flows
b.
currency boards
c.
dollarization
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
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HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:52 AM
DATE MODIFIED:
7/7/2016 1:54 AM
145. In recent years, the United States has accused China of manipulating the yuan so as to gain an unfair competitive
advantage in global trade. The United States has argued that China has
a.
maintained an overvalued yuan that makes U.S. exports to China more expensive
b.
maintained an undervalued yuan that makes U.S. exports to China more expensive
c.
helped the yuan’s exchange value to appreciate, thus making U.S. exports to China more expensive
d.
revalued the yuan by adjusting its part value upward, thus making U.S. exports to China more expensive
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
146. In recent years, the United States has accused China of manipulating the yuan so as to gain an unfair competitive
advantage in global trade. The United States has argued that the central bank of China has
a.
sold yuan and bought dollars, thus depreciating the yuan against the dollar
b.
sold yuan and bought dollars, thus appreciating the yuan against the dollar
c.
bought yuan and sold dollars, thus depreciating the yuan against the dollar
d.
bought yuan and sold dollars, thus appreciating the yuan against the dollar
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
147. In recent years, the United States has accused China of manipulating the yuan so as to gain an unfair competitive
advantage in global trade. Thus, proposals have been made that the United States should offset China’s currency
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Page 59
manipulation by
a.
selling yuan and buying dollars, thus depreciating the yuan against the dollar
b.
selling and buying dollars, thus appreciating the yuan against the dollar
c.
buying yuan and selling dollars, thus depreciating the yuan against the dollar
d.
buying yuan and selling dollars, thus appreciating the yuan against the dollar
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
148. A ______ is a type of a fixed exchange rate system in which the commitment to the fixed exchange rate is very firm
a.
currency board
b.
monetary policy board
c.
fiscal policy board
d.
customs board
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 2:00 AM
DATE MODIFIED:
7/7/2016 2:02 AM
149. Hong Kong provides an example of a country that has maintained a currency board. The purposes of its currency
board is to
a.
maintain a system of freely floating exchange rates
b.
maintain an especially strong commitment to a fixed exchange rate
c.
to totally replace the currency of Hong Kong with the U.S. dollar
d.
to totally replace the currency of Hong Kong with the euro
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
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Page 60
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
150. By adopting a currency board, a developing country hopes to
a.
drive interest rates down in order to increase domestic investment spending
b.
have its central bank switch from an inflationary policy to a deflationary policy
c.
discourage speculative attacks on its currency
d.
replace monetary policy with fiscal policy during times of economic downturn
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:04 AM
DATE MODIFIED:
7/7/2016 2:06 AM
151. For Ecuador, an advantage of adopting the dollar as its official currency is that
a.
the Federal Reserve becomes Ecuador’s lender of last resort
b.
Ecuador escapes the likelihood of a speculative attack
c.
Ecuador’s government can capture revenue by issuing currency (called seigniorage)
d.
Eduador’s monetary policy becomes independent from that of the Federal Reserve
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:06 AM
DATE MODIFIED:
7/7/2016 2:08 AM
152. For Ecuador, the result of adopting the dollar as its official currency is that
a.
its government cannot capture revenue (seigniorage) by issuing currency
b.
there tends to be greater promise of lower interest rates and greater financial stability
c.
the rate of inflation in Ecuador is tied to that of the United States
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d.
all of the above
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
153. Seigniorage refers to
a.
the extra tax revenue received by governments when people are pushed up into higher tax brackets
b.
the loss of purchasing power of income due to higher prices
c.
the revenue a government receives by issuing money
d.
the profits that corporations realize on their foreign direct investments
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of government
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:11 AM
DATE MODIFIED:
7/7/2016 2:13 AM
154. For a developing country, a _____ can foster economic instability because it can result in a lending boom and
______ by banks, which promotes a financial crisis.
a.
capital inflow; excessive risk taking
b.
capital inflow; inadequate risk taking
c.
capital outflow; excessive risk taking
d.
capital outflow; inadequate risk taking
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Measuring the economy
TOPICS:
Capital Controls
KEYWORDS:
BLOOM’S: Understand
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DATE CREATED:
7/7/2016 2:13 AM
DATE MODIFIED:
7/7/2016 2:16 AM
155. For a developing country, a _____ can promote economic instability because it forces the country to ______.
a.
capital inflow; adopt a contractionary monetary policy
b.
capital inflow; adopt an expansionary monetary policy
c.
capital outflow; devalue its currency
d.
capital outflow; revalue its currency
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Measuring the economy
TOPICS:
Capital Controls
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:17 AM
DATE MODIFIED:
7/7/2016 2:19 AM
156. By maintaining a strong commitment to fixed exchange rates, a currency board hopes that domestic inflation will
slow down and the possibility of a speculative attack against its currency will be reduced.
a.
True
b.
False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
157. The revenue that a government received by issuing money is called a fiscal dividend.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of government
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Page 63
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:21 AM
DATE MODIFIED:
7/7/2016 2:23 AM
158. If Ecuador adopts the U.S. dollar as its official currency, the country loses its seigniorage.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:23 AM
DATE MODIFIED:
7/7/2016 2:25 AM
159. If Argentine adopts the U.S. dollar as its official currency, it seeks to eliminate the possibility of a speculative attack
against its currency.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:25 AM
DATE MODIFIED:
7/7/2016 2:26 AM
160. A currency board is a type of a floating exchange rate system in which the commitment to the floating exchange rate
is very strong.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
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Page 64
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 2:27 AM
DATE MODIFIED:
7/7/2016 2:28 AM
161. If the Federal Reserve wants to see the dollar’s exchange value depreciate, it could pursue a contractionary monetary
policy.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 2:28 AM
DATE MODIFIED:
7/7/2016 2:30 AM
162. In recent years, the United States has accused China of manipulating the yuan so as to gain an unfair competitive
advantage in global trade. The United States has argued that the central bank of China has sold yuan and bought dollars,
thus depreciating the yuan against the dollar
a.
True
b.
False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
163. Sources of a currency crisis often include weak financial systems and budget deficits financed by inflation.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
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Page 65
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Currency Crises
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 2:34 AM
DATE MODIFIED:
7/7/2016 2:35 AM
164. An argument can be made for controls on the inflow of capital for developing countries because capital inflows can
lead to a lending boom, speculation, and excessive risk taking.
a.
True
b.
False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
165. An argument can be made for controls on the outflow of capital for developing countries because capital outflows
forces a country to revalue its currency.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Capital Controls
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:37 AM
DATE MODIFIED:
7/7/2016 2:39 AM
166. Although controls on the outflow of capital for developing countries may be appealing, they tend to suffer from
people finding ways to evade the controls and move funds out of the country.
a.
True
b.
False
ANSWER:
POINTS:
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Page 66
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
167. The Bretton Woods System of 1944-1973 was a flexible exchange rate system in which member countries allowed
their currencies to float within wide bands.
a.
True
b.
False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
168. The exchange rate system established by the Bretton Woods Agreement of 1944-1973 was an adjustable pegged
system.
a.
True
b.
False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
NATIONAL STANDARDS:
STATE STANDARDS:
TOPICS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED: