Question 1

During the gold standard, national money supplies were constrained by:

Accepted Answer

A)   International treaties
B)   The growth of trade
C)   Commodity indexes
D)   The growth of the stock of goldE) A) and B)
F) B) and C)

Question 2

An example of a fixed exchange rate was the gold standard.

Accepted Answer

A) True 
 B)False

Question 3

Perfect mobility of factors of production is a requirement for

Accepted Answer

A)   Spatially concentrated trade zones
B)   Optimal currency areas
C)   Commodity money standards
D)   Free floating exchange ratesE) A) and C)
F) A) and D) B

Question 4

What exchange rate is maintained with a central rate that is frequently adjusted?

Accepted Answer

A)   Fixed Peg
B)   Currency board
C)   Managed floating
D)   Crawling bandsE) A) and D)
F) A) and B)

Question 5

The geographic area that would maximize economic benefits by keeping the exchange rate fixed within the area is a an) :

Accepted Answer

A)   Trade union
B)   Currency board
C)   Trade bloc
D)   Optimal currency areaE) None of the above
F) All of the above

Question 6

A managed floating exchange rate is a market determined exchange system as long as rates stay between target zones as mandated by legislative commitments.

Accepted Answer

A) True 
 B)False  False

Question 7

The gold standard was an example of:

Accepted Answer

A)   An optimum currency area
B)   A commodity money standard
C)   A standard currency board
D)   All of the aboveE) B) and D)
F) C) and D) B

Question 8

Countries use reserve currencies as an international unit of account, a medium of exchange, and a store of value.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following economies has adopted a "currency board" exchange rate system?

Accepted Answer

A)   Malaysia
B)   South Korea
C)   China
D)   Hong KongE) B) and C)
F) A) and D)

Question 10

Use the graph below to answer questions
Figure 2.3:
 
-Refer to Figure 2.3. Suppose that the spot exchange rate of British pound is $2.00 per pound. Suppose that the U.S. decreases its imports from the U.K. Under flexible exchange rate system, the Bank of England will:

Accepted Answer

A)   let the British pound appreciates
B)   let the British pound depreciates
C)   sell pounds and buy dollars in foreign exchange market.
D)   sell dollars and buy pounds in foreign exchange market.E) B) and D)
F) B) and C)

Question 11

Destabilizing speculation is the process where

Accepted Answer

A)   In a free floating exchange system, speculators cause wide fluctuations to the exchange rate.
B)   In a fixed peg exchange system, speculators hold foreign reserves too long and destabilize the peg.
C)   In a free floating exchange system, the International Monetary Fund is forced to issue Special Drawing Rights.
D)   In a fixed peg exchange system, speculators sell all holdings of Special Drawing Rights.E) A) and B)
F) A) and C)

Question 12

In general, the smaller the country is, the more likely it is to peg its exchange rate.

Accepted Answer

A) True 
 B)False

Question 13

-Referring to Figure 2.1, the pound per dollar exchange rate starts at 2.00. Assume that an increase in the taste for U.S. imports by U.K. residents leads to a shift in the supply of pounds. If the Bank of England wishes to intervene by buying pounds to restore the peg of $2.0/pound, what distance represents that intervention?

Accepted Answer

A)   A to B
B)   B to A
C)   A to D
D)   D to BE) A) and D)
F) None of the above

Question 14

A pegged exchange rate is: I. Fixed to a currency or basket of currencies
II)  Responds to indicators such as inflation differentials) 
III)  May require intervention to maintain the target pegged rate

Accepted Answer

A)   I only
B)   III only
C)   I and III
D)   I, II, and IIIE) B) and C)
F) C) and D)

Question 15

Consider the market for Chinese currency yuan) . Suppose that the initial equilibrium exchange rate was $0.125 per one yuan. Then assume that American consumers like Chinese products more than before. If China's central bank wants to peg the exchange rate at its initial level $0.125 per yuan) , the central bank will have to

Accepted Answer

A)   buy yuan and sell dollar.
B)   sell yuan and buy dollar.
C)   buy yuan and buy dollar.
D)   sell yuan and sell dollar.E) B) and D)
F) A) and C)

Question 16

An example of an optimal currency area would be

Accepted Answer

A)   United States
B)   Southeast Asia
C)   Latin America
D)   Both A and CE) None of the above
F) All of the above

Question 17

The International Monetary Fund was created at the beginning of the:

Accepted Answer

A)   Bretton Woods system
B)   Gold standard
C)   Interwar period
D)   Smithsonian agreementE) B) and D)
F) A) and B)

Question 18

Which of the following exchange rate systems is the least flexible?

Accepted Answer

A)   Free floating
B)   Managed floating.
C)   Currency board
D)   Fixed peg arrangementE) All of the above
F) A) and B)

Question 19

When the United States suspended the convertibility of dollars into gold in 1971, this lead to:

Accepted Answer

A)   The collapse of the Bretton Woods system
B)   Creation of the regional currency boards
C)   Creation of the International Monetary Fund
D)   All of the aboveE) None of the above
F) A) and C)

Question 20

The Bretton Woods agreement required that each country, other than the U.S., fix the value of its currency in terms of an) :

Accepted Answer

A)   Ounce of gold
B)   Common currency
C)   Commodity basket
D)   Anchor currencyE) None of the above
F) All of the above

Exam 2: Tools of Analysis for International Trade Models

During the gold standard, national money supplies were constrained by:

Correct Answer
verified

An example of a fixed exchange rate was the gold standard.

Correct Answer
verified

Perfect mobility of factors of production is a requirement for

Correct Answer
verified
B

What exchange rate is maintained with a central rate that is frequently adjusted?

Correct Answer
verified

The geographic area that would maximize economic benefits by keeping the exchange rate fixed within the area is a an) :

Correct Answer
verified

A managed floating exchange rate is a market determined exchange system as long as rates stay between target zones as mandated by legislative commitments.

Correct Answer
verified
False

The gold standard was an example of:

Correct Answer
verified
B

Countries use reserve currencies as an international unit of account, a medium of exchange, and a store of value.

Correct Answer
verified

Which of the following economies has adopted a "currency board" exchange rate system?

Correct Answer
verified

Use the graph below to answer questions Figure 2.3: -Refer to Figure 2.3. Suppose that the spot exchange rate of British pound is $2.00 per pound. Suppose that the U.S. decreases its imports from the U.K. Under flexible exchange rate system, the Bank of England will:

Correct Answer
verified

Destabilizing speculation is the process where

Correct Answer
verified

In general, the smaller the country is, the more likely it is to peg its exchange rate.

Correct Answer
verified

Correct Answer
verified

A pegged exchange rate is: I. Fixed to a currency or basket of currencies II) Responds to indicators such as inflation differentials) III) May require intervention to maintain the target pegged rate

Correct Answer
verified

Correct Answer
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An example of an optimal currency area would be

Correct Answer
verified

The International Monetary Fund was created at the beginning of the:

Correct Answer
verified

Which of the following exchange rate systems is the least flexible?

Correct Answer
verified

When the United States suspended the convertibility of dollars into gold in 1971, this lead to:

Correct Answer
verified

The Bretton Woods agreement required that each country, other than the U.S., fix the value of its currency in terms of an) :

Correct Answer
verified

Exam 2: Tools of Analysis for International Trade Models

During the gold standard, national money supplies were constrained by:

Correct AnswerverifiedShow Answer

An example of a fixed exchange rate was the gold standard.

Correct AnswerverifiedShow Answer

Perfect mobility of factors of production is a requirement for

Correct AnswerverifiedB

What exchange rate is maintained with a central rate that is frequently adjusted?

Correct AnswerverifiedShow Answer

The geographic area that would maximize economic benefits by keeping the exchange rate fixed within the area is a an) :

Correct AnswerverifiedShow Answer

A managed floating exchange rate is a market determined exchange system as long as rates stay between target zones as mandated by legislative commitments.

Correct AnswerverifiedFalse

The gold standard was an example of:

Correct AnswerverifiedB

Countries use reserve currencies as an international unit of account, a medium of exchange, and a store of value.

Correct AnswerverifiedShow Answer

Which of the following economies has adopted a "currency board" exchange rate system?

Correct AnswerverifiedShow Answer

Use the graph below to answer questions Figure 2.3: -Refer to Figure 2.3. Suppose that the spot exchange rate of British pound is $2.00 per pound. Suppose that the U.S. decreases its imports from the U.K. Under flexible exchange rate system, the Bank of England will:

Correct AnswerverifiedShow Answer

Destabilizing speculation is the process where

Correct AnswerverifiedShow Answer

In general, the smaller the country is, the more likely it is to peg its exchange rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A pegged exchange rate is: I. Fixed to a currency or basket of currencies II) Responds to indicators such as inflation differentials) III) May require intervention to maintain the target pegged rate

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An example of an optimal currency area would be

Correct AnswerverifiedShow Answer

The International Monetary Fund was created at the beginning of the:

Correct AnswerverifiedShow Answer

Which of the following exchange rate systems is the least flexible?

Correct AnswerverifiedShow Answer

When the United States suspended the convertibility of dollars into gold in 1971, this lead to:

Correct AnswerverifiedShow Answer

The Bretton Woods agreement required that each country, other than the U.S., fix the value of its currency in terms of an) :

Correct AnswerverifiedShow Answer

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B

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False

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B

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