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| 1 | |
The major benefit of the gold standard was that it avoided _________, and the major drawback was that monetary policy was ____________. |
| | A) | inflation, ineffective |
| | B) | recession, effective |
| | C) | inflation, effective |
| | D) | recession, ineffective |
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| 2 | |
A(n) _________________ is a policy rule for intervening (or not) in the forex market. |
| | A) | balance of payments policy |
| | B) | current account policy |
| | C) | exchange rate regime |
| | D) | fiscal policy |
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| 3 | |
A ______________ of different countries is a commitment to permanently ______. exchange rates |
| | A) | monetary union, fixed |
| | B) | monetary union, variable |
| | C) | cartel, fixed |
| | D) | cartel, variable |
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| 4 | |
If a country operates a fixed exchange rate which may be occasionally changed, it is known as ___________ . |
| | A) | a fixed exchange rate |
| | B) | a floating exchange rate |
| | C) | an adjustable peg |
| | D) | a snake |
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| 5 | |
Fixed exchange rates, perfect capital mobility, and monetary sovereignty can coexist at the same time. |
| | A) | True |
| | B) | False |
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| 6 | |
In a managed float, central banks intervene in the _____ market to try to _________________ and nudge the exchange rate in the desired direction. |
| | A) | forex, smooth out fluctuations |
| | B) | money, remain on the floor |
| | C) | money, remain on the ceiling |
| | D) | forex, remain on the floor |
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| 7 | |
A _____________ is a large capital outflow which if successful can cause __________. |
| | A) | balance of payments surplus, inflation |
| | B) | speculative attack, devaluation |
| | C) | speculative attack, revaluation |
| | D) | balance of payments surplus, unemployment |
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| 8 | |
_____________ prohibit, restrict, or tax, the flow of private capital across currencies |
| | A) | Forex controls |
| | B) | Border controls |
| | C) | Capital controls |
| | D) | Exchange controls |
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| 9 | |
When capital mobility is _______, to peg the exchange rate between two countries, both countries need to have _______ interest rate. |
| | A) | low, the same |
| | B) | high, the same |
| | C) | low, a different |
| | D) | high, a different |
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| 10 | |
Under the gold standard, a country fixed the par value of its currency against _______, and linked ___________ to gold stocks at the central bank. |
| | A) | silver, the interest rate |
| | B) | bonds, the price level |
| | C) | gold, banks' credit creation |
| | D) | gold, the domestic money supply |
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| 11 | |
An adjustable peg is a fixed change rate which never changes. |
| | A) | True |
| | B) | False |
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| 12 | |
The purchasing power parity of the nominal exchange rate maintains constant ________ by offsetting differential _________ across countries. |
| | A) | prices, interest rates |
| | B) | competitiveness, inflation |
| | C) | prices, wage costs |
| | D) | competitiveness, interest rates |
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| 13 | |
In the short run, the level of floating exchange rates is determined mainly by _________. |
| | A) | interest rates |
| | B) | competitiveness |
| | C) | trade |
| | D) | speculation |
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| 14 | |
In the long run, floating exchange rates return to their purchasing power parity. |
| | A) | True |
| | B) | False |
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| 15 | |
If one country, with floating exchange rates, has higher inflation than its competitors, we would expect its exchange rate to __________. |
| | A) | appreciate |
| | B) | depreciate |
| | C) | revalue |
| | D) | be in short supply |
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| 16 | |
Floating exchange rates are _________ in the short run. |
| | A) | stable |
| | B) | predictable |
| | C) | volatile |
| | D) | depreciating |
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| 17 | |
Fixed exchange rates permit a country to have permanently higher inflation than other countries. |
| | A) | True |
| | B) | False |
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| 18 | |
The main features of the European Monetary system are _______. |
| | A) | the ECU |
| | B) | currency swap agreement between member countries |
| | C) | the exchange rate mechanism |
| | D) | all of the above |
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| 19 | |
In the ERM, each country fixed ____________ against each other ERM participant. Collectively the group _________ against the rest of the world. |
| | A) | a nominal exchange rate, floated |
| | B) | a real exchange rate, pegged |
| | C) | a purchasing power parity, pegged |
| | D) | a real exchange rate, floated |
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| 20 | |
International policy co-ordination allows policy-makers to commit to policies they would otherwise avoid. |
| | A) | True |
| | B) | False |
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