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Page 20
DATE MODIFIED:
6/22/2016 3:27 PM
47. International reserves allow a country to finance disequilibria in its balance-of-payments position.
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
48. An advantage of international reserves is that they allow countries to sustain temporary balance-of-payments deficits
until acceptable adjustment measures can operate to correct the disequilibrium.
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
49. With floating exchange rates, countries require sizable amounts of international reserves for the stabilization of
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
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Page 21
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
50. When exchange rates are fixed by central bankers, the need for international reserves disappears.
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
51. When exchange rates are fixed by central bankers, international reserves are necessary for financing payments
imbalances and the stabilization of exchange rates.
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
52. There exists a direct relationship between the degree of exchange rate flexibility and the need for international
reserves.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
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Page 22
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
53. With floating exchange rates, payments imbalances tend to be corrected by market-induced fluctuations in the
exchange rate, and the need for exchange-rate stabilization and international reserves disappears.
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
The diagram below represents the exchange market position of the United States in trade with the United Kingdom.
Starting at the equilibrium exchange rate of $3 per pound, suppose the demand for pounds rises from D0 to D1.
Figure 17.1 Foreign Exchange Market
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Page 23
54. Refer to Figure 17.1. Under a fixed exchange rate system, U.S. monetary authorities would have to supply 8 million
pounds in exchange for dollars to keep the exchange rate at $3 per pound.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
PREFACE NAME:
Figure 17.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
55. Refer to Figure 17.1. If the exchange rate was allowed to rise to $4 per pound, U.S. monetary authorities would have
to supply 6 million pounds to the foreign exchange market in exchange for dollars to maintain this rate.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
PREFACE NAME:
Figure 17.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
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Page 24
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
56. Refer to Figure 17.1. Under a floating exchange rate system, the exchange rate would rise to $4 and U.S. monetary
authorities would have to supply 4 million pounds to the foreign exchange market in exchange for dollars to maintain this
rate.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
PREFACE NAME:
Figure 17.1
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:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
57. To the extent that adjustments in prices, interest rates, and income levels promote balance-of-payments equilibrium,
the demand for international reserves decreases.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
58. The greater a nation’s propensity to apply tariffs and quotas to key sectors, the greater will be the need for international
reserves.
a.
True
b.
False
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Page 25
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
59. The demand for international reserves is negatively related to the level of world prices and income.
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:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
60. The demand for international reserves tend to increase with the level of world income and trade activity.
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:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
61. If a nation with a balance-of-payments deficit is willing and able to initiate quick actions to increase export receipts
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Page 26
and decrease import payments, the amount of international reserves needed will be relatively large.
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:
Supply of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
62. The supply of international reserves consists of owned reserves and borrowed reserves.
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:
Supply of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
63. Foreign currencies constitute the smallest component of the world’s international reserves.
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:
Supply of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
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Page 27
DATE MODIFIED:
6/22/2016 3:27 PM
64. Gold constitutes the largest component of the world’s international reserves.
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:
Gold
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
65. The U.S. dollar has been considered a reserve (key) currency because trading nations have been willing to hold it as an
international reserve asset.
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:
Foreign Currencies
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
66. The U.S. dollar, Japanese yen, British pound, and Mexican peso are the major reserve currencies 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
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Page 28
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
67. By the 1990s, the British pound had replaced the U.S. dollar as the world’s key 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
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
68. A goal of the International Monetary Fund is to make short-term loans to member nations so as to allow them to
correct balance of payments disequilibriums without resorting to measures that would destroy national prosperity.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
69. When granting loans to financially troubled nations, the International Monetary Fund requires some degree of
conditionality, meaning that the borrowing nation must agree to implement economic policies as mandated by the IMF.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
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Page 29
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
70. The International Monetary Fund has sometimes demanded that financially-troubled nations, that borrow from the
IMF, undergo austerity programs including slashing of public spending and private consumption.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
71. The main purpose of the International Monetary Fund is to grant long-term loans to developing nations to help them
finance the development of infrastructure such as roads, dams, and bridges.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
72. Gold is currently the most widely used asset in the international monetary system.
a.
True
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Page 30
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:
Gold
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
73. In 1974 the United States revoked a 41-year ban on U.S. citizen’s ownership of gold.
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:
Gold
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
74. In 1975 the official price of gold was abolished as the unit of account for the international monetary system. As a
result, gold was demonetized as an international reserve asset.
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:
Gold
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
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Page 31
75. In the 1970s, the major industrial countries abandoned the managed-floating exchange rate system and adopted a
system of fixed exchange rates tied to the price 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:
Gold
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
76. Created by the International Monetary Fund, special drawing rights (SDRs) are unconditional rights to draw
currencies of other nations, thus enabling countries to finance their current-account deficits.
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:
Special Drawing Rights
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
77. The value of the SDR is tied to a currency basket consisting of the U.S. dollar, German mark, Japanese yen, French
franc, and British pound.
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
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Page 32
TOPICS:
Special Drawing Rights
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
78. The SDR has replaced the dollar, yen, and mark as the key asset of the international financial 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:
Special Drawing Rights
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
79. Because the value of the SDR is tied directly to the value of the U.S. dollar, a 10 percent dollar depreciation would
result in a 10 percent decrease in the SDR’s value.
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:
Special Drawing Rights
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
80. A main purpose of the International Monetary Fund is to make loans of foreign currencies to member countries which
are experiencing current-account surpluses.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
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Page 33
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
81. When a deficit nation borrows from the International Monetary Fund, it purchases with its currency the foreign
currency required to help finance the payments deficit.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
82. The so-called General Arrangements to Borrow provide a permanent increase in the supply of international reserves.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
83. Swap arrangements are bilateral agreements between central banks to allow countries to temporarily borrow funds to
ease current-account deficits and discourage speculative capital flows.
a.
True
b.
False
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Page 34
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
84. IMF drawings, swap arrangements, buffer stock facility, and compensatory financing for exports are classified as
owned reserves rather than borrowed reserves.
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:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
85. Concerning international lending risk, credit risk refers to the probability that part or all of the interest rate or principal
of a loan will not be repaid.
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:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
Copyright Cengage Learning. Powered by Cognero.
Page 35
86. Concerning international lending risk, country risk refers to the risk that part or all of the interest or principal of a loan
will not be repaid.
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:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
87. Concerning international lending risk, currency risk is the risk of asset losses due to changing currency values.
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:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
88. A country with a high debt/export ratio and a high debt service/export ratio would likely be considered as an attractive
place in which to invest by foreign residents.
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
Copyright Cengage Learning. Powered by Cognero.
Page 36
TOPICS:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
89. A debt buyback is a debt-reduction technique in which a government of a debtor nation buys loans from commercial
banks at a discount.
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:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
90. Under a debt-for-debt swap, a commercial bank sells its loans at a discount to a developing country government for
local currency which it then uses to finance an equity investment in the debtor country.
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:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
91. A debt-equity swap results in a trade surplus nation forgiving the loans made to a trade-deficit nation.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
Copyright Cengage Learning. Powered by Cognero.
Page 37
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:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
92. Eurocurrencies are deposits, denominated and payable in dollars and other foreign currencies, in banks outside the
United States, primarily in London, the market’s center.
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:
The Eurodollar Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
93. Why do countries hold international reserves?
ANSWER:
The purpose of international reserves is to permit nations to bridge the gap between monetary
receipts and payments.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Subjective Short Answer
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:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
94. How can a bank reduce its exposure to the debt of developing nations?
ANSWER:
It can reduce exposure through outright loan sales in the secondary market, debt buybacks,
debt-for-debt swaps, and debt/equity swaps.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Subjective Short Answer
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:
Reducing Bank Exposure to Developing Nation Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
95. Describe the eurocurrency market.
ANSWER:
Eurocurrencies are deposits, denominated and payable in dollars and other foreign currencies,
such as Swiss franc, in banks outside the United States, primarily in London, the market’s
center. Most eurocurrency trading occurs in non-European centers, such as Hong Kong, and
Singapore. Dollar deposits located in banks outside the United States are known as
eurodollars, and banks that conduct trading in the markets for eurocurrencies are designated
eurobanks.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Essay
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:
The Eurodollar Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
96. Are international reserve needs different for different exchange rate regimes?
ANSWER:
The need for international reserves tends to become less acute under a system of floating rates
than under a system of fixed rates. The more efficient the international adjustment mechanism
and the greater the extent of international policy coordination, the smaller the need for
international reserves.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Essay
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:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM