20.3 Exchange Rate Regimes in the International Financial System 1) Under a gold standard in which one dollar could be turned in to the Bank of Canada and exchanged for 1/20th of an ounce of gold and one German mark could be exchanged for 1/100th of an ounce of gold, an exchange rate of ________ marks to the dollar would stimulate a flow of gold from Canada to Germany. A) 7 B) 6 C) 5 D) 4
20.3 Exchange Rate Regimes in the International Financial System
1) Under a gold standard in which one dollar could be turned in to the Bank of Canada and exchanged for 1/20th of an ounce of gold and one German mark could be exchanged for 1/100th of an ounce of gold, an exchange rate of ________ marks to the dollar would stimulate a flow of gold from Canada to Germany.
A) 7
B) 6
C) 5
D) 4
2) A balance of payments deficit is associated with a ________ of international reserves, while a balance of payments surplus is associated with a ________.
A) loss; loss
B) loss; gain
C) gain; loss
D) gain; gain
3) When gold production was low in the 1870s and 1880s, the money supply grew ________ causing ________.
A) rapidly; inflation
B) rapidly; disinflation
C) slowly; deflation
D) slowly; disinflation
4) The fixed exchange rate regime established at a meeting in New Hampshire in 1944 has been known as the ________.
A) General Agreement on Tariffs and Trade
B) Bretton Woods system
C) International Settlement Fund
D) Balance of Payments Compliance Accord
5) Under the Bretton Woods system, the organization assigned the task of making loans to countries that were experiencing balance of payments difficulties is known as the ________.
A) World Bank
B) International Development Association
C) International Monetary Fund
D) Bank of Canada
6) The Bretton Woods agreement created the ________, which was given the task of promoting the growth of world trade by setting rules for the maintenance of fixed exchange rates and by making loans to countries that were experiencing balance of payments difficulties.
A) IMF
B) World Bank
C) Central Settlements Bank
D) Bank of International Settlements
7) The World Bank is an international organization that ________.
A) promotes the growth of trade by setting rules for how tariffs and quotas are set by countries
B) makes loans to countries to finance projects such as dams and roads
C) makes loans to countries with balance of payment difficulties
D) helps developing countries that have been having difficulties in repaying their loans to come to terms with lenders in the West
8) Under the Bretton Woods system, the United States was designated as the ________.
A) reserve-currency country
B) fixed-rate country
C) par-standard country
D) dollar-standard country
9) Under a fixed exchange rate regime, if the domestic currency is initially ________, that is, ________ par, the central bank must intervene to sell the domestic currency by purchasing foreign assets.
A) overvalued; below
B) overvalued; above
C) undervalued; below
D) undervalued; above
10) Under a fixed exchange rate regime, if the domestic currency is initially undervalued, that is, above par, the central bank must intervene to sell the ________ currency by purchasing ________ assets.
A) domestic; foreign
B) domestic; domestic
C) foreign; foreign
D) foreign; domestic
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