The International Monetary System

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Question 1

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The international monetary system refers to the institutional arrangements that govern exchange rates.

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Question 2

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A pegged exchange rate means the value of a currency is fixed relative to a reference currency.

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Question 3

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A dirty float occurs when a country uses pegged exchange rates to value its currency.

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Question 4

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The gold standard called for fixed exchange rates against the U.S.dollar.

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Question 5

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The amount of a currency needed to purchase one ounce of gold was referred to as the gold par value under the gold standard.

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Question 6

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A country is said to be in balance-of-trade equilibrium when it produces all the goods needed for domestic consumption.

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Question 7

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The agreement reached at Bretton Woods established the International Monetary Fund (IMF)and the World Bank.

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Question 8

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Implementing a fixed exchange rate regime increases the price inflation in countries.

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Question 9

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World Bank offers low-interest loans to risky customers whose credit rating is often poor.

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Question 10

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IDA loans receive direct funding from the World Bank.

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Question 11

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The fixed exchange rate system established at Bretton Woods failed due to speculative pressures on the U.S.dollar.

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Question 12

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Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.

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Question 13

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IMF members were permitted to sell their own gold reserves at the market price in the Jamaica agreement.

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Question 14

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The value of U.S dollar increased between 1980 and 1985 despite running a growing trade deficit.

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Question 15

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The rise in the value of the dollar gave U.S goods a competitive advantage over others between 1985 and 1988.

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Question 16

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Market forces have produced a stable dollar exchange rate under a floating exchange rate regime.

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Question 17

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Advocates of a floating exchange rate regime argue that removal of the obligation to maintain exchange rate parity would restore monetary control to a government.

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Question 18

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The monetary autonomy argument is supported by the advocates of fixed exchange rates.

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Question 19

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Fixed exchange rates lead to speculation and uncertainty in the value of currencies.

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Question 20

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Supporters of floating exchange rates claim that trade deficits are determined by the balance between savings and investment in a country.

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