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Page 21
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
50. Refer to Figure 15.1. Suppose the United States decreases investment spending in Switzerland, thus reducing the
demand for francs from D0 to D2. Under a floating exchange rate system, the new equilibrium exchange rate would be:
a.
$0.40 per franc
b.
$0.50 per franc
c.
$0.60 per franc
d.
$0.70 per franc
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
51. Refer to Figure 15.1. Suppose the demand for francs increases from D0 to D1. Under a fixed exchange rate system, the
U.S. exchange stabilization fund could maintain a fixed exchange rate of $0.50 per franc by:
a.
Selling francs for dollars on the foreign exchange market
b.
Selling dollars for francs on the foreign exchange market
c.
Decreasing U.S. exports, thus decreasing the supply of francs
d.
Stimulating U.S. imports, thus increasing the demand for francs
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
Copyright Cengage Learning. Powered by Cognero.
Page 22
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
Table 15.1. The Market for Francs
Dollar price
of francs
$0.05
0.10
0.15
0.20
0.25
0.30
0.35
52. Refer to Table 15.1. Under a system of floating exchange rates, the equilibrium exchange rate equals:
a.
$0.15 per franc
b.
$0.20 per franc
c.
$0.25 per franc
d.
$0.30 per franc
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 15.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
53. Refer to Table 15.1. If monetary authorities fix the exchange rate at $0.10 per franc, there would be a:
a.
Shortage of 200 francs
b.
Shortage of 400 francs
c.
Surplus of 200 francs
d.
Surplus of 400 francs
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
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Page 23
PREFACE NAME:
Table 15.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
54. Refer to Table 15.1. If monetary authorities fix the exchange rate at $0.30 per franc, there will be a:
a.
Shortage of 200 francs
b.
Shortage of 400 francs
c.
Surplus of 200 francs
d.
Surplus of 400 francs
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 15.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
55. Under managed floating exchange rates, the Federal Reserve could offset an appreciation of the dollar against the yen
by:
a.
Increasing the money supply which promotes falling interest rates and net investment outflows
b.
Increasing the money supply which promotes rising interest rates and net investment inflows
c.
Decreasing the money supply which promotes falling interest rates and net investment outflows
d.
Decreasing the money supply which promotes rising interest rates and net investment inflows
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
56. Under managed floating exchange rates, a central bank would initiate:
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Page 24
a.
Contractionary monetary policy to offset a depreciation of its currency
b.
Contractionary monetary policy to offset an appreciation of its currency
c.
Expansionary monetary policy to offset a depreciation of its currency
d.
None of the above
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
57. To offset an appreciation of the dollar against the yen, the Federal Reserve would:
a.
Sell dollars on the foreign exchange market and lower domestic interest rates
b.
Sell dollars on the foreign exchange market and raise domestic interest rates
c.
Buy dollars on the foreign exchange market and lower domestic interest rates
d.
Buy dollars on the foreign exchange market and raise domestic interest rates
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
58. To help insulate their economies from inflation, currency depreciation, and capital flight, developing countries have
implemented:
a.
Regional trading blocs
b.
Currency boards
c.
Central banks
d.
Regional fiscal policies
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 25
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
59. If Mexico dollarizes its economy, it essentially
a.
Allows the Federal Reserve to be its lender of last resort
b.
Accepts the monetary policy of the Federal Reserve
c.
Ensures that its business cycle was identical to that of the U.S.
d.
Abandons its ability to run governmental balanced budgets
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
60. If Mexico fully dollarizes its economy, it agrees to
a.
Print pesos only to finance deficits of its national government
b.
Use the U.S. dollar alongside its peso to finance transactions
c.
Have the U.S. Treasury be in charge of its tax collections
d.
Replace pesos with U.S. dollars in its economy
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
61. An objective of the dollarization of the Mexican economy would be to:
a.
Shield its economy from hyperinflation, currency depreciation, and capital flight
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Page 26
b.
Allow the Federal Reserve to be its lender of last resort
c.
Ensure that its monetary policy is independent of the Federal Reserve
d.
Permit it to benefit from tariffs and subsidies imposed by the U.S. government
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
62. In order to stabilize a currency, the central bank will need to adopt
a.
An expansionary monetary policy to offset currency depreciation
b.
An expansionary monetary policy to offset currency appreciation
c.
A contractionary policy to offset currency appreciation
d.
Both b and c
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
63. The crawling peg is a
a.
Fixed exchange rate system
b.
Floating exchange rate system
c.
Compromise between fixed and floating exchange rates
d.
Exchange rate system used by nations experiencing no inflation
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
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Page 27
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
The Crawling Peg
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
64. Exchange rate controls
a.
Achieved prominence during the economic crises of the late 1930′s
b.
Were popular immediately after World War II
c.
Are widely used by the developing nations
d.
All of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
65. The flexibility of floating rates may generate the problem of
a.
Inflationary bias
b.
Deflationary bias
c.
Continuous depreciation
d.
Both a and c
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
Figure 15.2 Market for the British Pound
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Page 28
66. Refer to Figure 15.2. Demand and supply of British Pounds is initially D0 and S0. With a system of floating exchange
rates, the equilibrium exchange rate is:
a.
$0.40 per pound
b.
$0.60 per pound
c.
$0.80 per pound
d.
$1.00 per pound
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
67. Refer to Figure 15.2. Suppose that the United States increases its imports from England. Under a floating exchange
rate system, the new equilibrium exchange rate would be:
a.
$0.40 per pound
b.
$0.60 per pound
c.
$0.80 per pound
d.
$1.00 per pound
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
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Page 29
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
68. Refer to Figure 15.2. Suppose the United States decreases investment spending in England. Under a floating exchange
rate system, the new equilibrium exchange rate would be:
a.
$0.40 per franc
b.
$0.60 per franc
c.
$0.80 per franc
d.
$1.00 per franc
ANSWER:
b
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
69. Refer to Figure 15.2. Suppose the demand for pounds increases from D0 to D1. Under a fixed exchange rate system,
the U.S. exchange stabilization fund could maintain a fixed exchange rate of $0.80 per pound by:
a.
Selling pounds for dollars on the foreign exchange market
b.
Selling dollars for pounds on the foreign exchange market
c.
Decreasing U.S. exports, thus decreasing the supply of pounds
d.
Stimulating U.S. imports, thus increasing the demand for pounds
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 15.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
Copyright Cengage Learning. Powered by Cognero.
Page 30
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
70. By the early 1970s, gold had been phased out of the international monetary system.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
71. Since 1974, the major industrial countries have operated under a system of fixed exchange rates based on the gold
standard.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
72. Today, fixed exchange rates are used primarily by small, developing countries that tie their currencies to a key
currency such as the U.S. dollar.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
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Page 31
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
73. Smaller nations with relatively undiversified economies and large trade sectors tend to peg their currencies to one of
the world’s key currencies.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
74. Large industrial nations with diversified economies and small trade sectors have generally pegged their currencies to
one of the world’s key currencies.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
75. Small nations, such as Angola and Barbados, peg their currencies to the U.S. dollar since the prices of many of their
traded goods are determined in markets in which the dollar is the key currency.
a.
True
b.
False
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Page 32
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Increasing the Credibility of Fixed Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
76. Many developing nations with low inflation rates have pegged their currencies to the U.S. dollar as a way of allowing
modest increases in domestic inflation rates.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
77. Pegging to a single currency is generally done by developing nations whose trade and financial relationships are
mainly with a single industrial-country partner.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
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Page 33
78. Developing countries with more than one major trading partner often peg their currencies to a group or basket of those
trading partner currencies.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
79. Most developing countries have chosen to allow their currencies to float independently in the foreign exchange
market.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
80. Today, special drawing rights (SDRs) represent the most important currency basket against which developing
countries maintain pegged exchange rates.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
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Page 34
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
81. The special drawing right is a currency basket of five major industrial country currencies.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
82. The Australian dollar is currently regarded is the key currency of the international monetary system.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
83. A “key currency” is one that is widely traded on world money markets, has demonstrated relative stable values over
time, and has widely been accepted as a means of international settlement.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
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Page 35
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
84. The U.S. dollar is generally regarded as the major “key currency” of the international monetary system.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
85. Most nations currently allow their currencies’ exchange values to be determined solely by the forces of supply and
demand in a free market.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
86. Under the gold standard, the official exchange rate would be $2.80 per pound as long as the United States bought and
sold gold at a fixed price of $35 per ounce and Britain bought and sold gold at 12.5 pounds per ounce.
a.
True
b.
False
ANSWER:
True
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Page 36
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
87. The par values of most developing-country currencies are currently defined in terms of gold.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
88. The purpose of an exchange stabilization fund is to ensure that the market exchange rate does not deviate beyond
unacceptable levels from the official exchange rate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
89. To keep the pound’s exchange value from depreciating against the franc, the British exchange stabilization fund would
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Page 37
sell pounds for francs on the foreign exchange market.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
90. To keep the yen’s exchange value from appreciating against the dollar, Japan’s exchange stabilization fund would buy
yen for dollars on the foreign exchange market.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
91. The purpose of currency devaluation is to cause the home country’s exchange value to appreciate, thus reducing a
balance of trade surplus.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
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Page 38
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
92. If Uganda devalues its shilling by 10 percent and Burundi devalues its franc by 5 percent, the shilling’s exchange value
appreciates 10 percent against the franc.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
93. If Uganda sets its par value at 400 shillings per SDR and Burundi sets its par value at 200 francs per SDR, the official
exchange rate is 1 franc = o.5 shillings.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
94. If Uganda revalues its shilling by 20 percent and Burundi devalues its franc by 5 percent, the shillings exchange value
will appreciate by 25 percent against the franc.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
Copyright Cengage Learning. Powered by Cognero.
Page 39
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
95. Unlike floating exchange rates, fixed exchange rates are not characterized by par values and central bank intervention
in the foreign exchange market.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
96. Because there is no exchange stabilization fund under floating exchange rates, any holdings of international reserves
serve as working balances rather than to maintain a given exchange rate for any currency.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Floating Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
97. Under an adjustable-pegged system, market exchange rates are intended to be maintained within a narrow band around
a currency’s official exchange rate. In the case of fundamental disequilibrium, the currency can be devalued or revalued to
promote current-account equilibrium.
a.
True
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Page 40
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Fixed Exchange-Rate System
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
98. In 1973 the major industrial countries terminated managed-floating exchange rates and adopted an adjustable-pegged
exchange rates.
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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
99. A “dirty float” occurs when a nation used central bank intervention in the foreign exchange market to promote a
depreciation of its currency’s exchange value, thus gaining a competitive advantage compared to its trading partners.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Managed Floating Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM