The International Monetary System

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Questions Bank

Multinational Financial Management: Opportunities and Challenges
The International Monetary System
The Balance of Payments
Financial Goals and Corporate Governance
The Foreign Exchange Market
International Parity Conditions
Foreign Currency Derivatives: Futures and Options
Interest Risk and Swaps
Foreign Exchange Rate Determination and Intervention
Transaction Exposure
Translation Exposure
Operating Exposure
Global Cost and Availability of Capital
Funding the Multinational Firm
Multinational Tax Management
International Trade Finance
Foreign Direct Investment and Political Risk
Multinational Capital Budgeting and Cross-Border Acquisitions

All Questions

Question 1

Free

Multiple Choice

Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange regime was:

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£4.8665/$.

£0.2055/$.

always changing because the price of gold was always changing.

unknown because there is not enough information to answer this question.

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Question 2

Free

Multiple Choice

World War I caused the suspension of the gold standard for fixed international exchange rates because the war:

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cost too much money.

interrupted the free movement of gold.

lasted too long.

used gold as the main ingredient in armament plating.

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Question 3

Free

Multiple Choice

The post WWII international monetary agreement that was developed in 1944 is known as the:

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United Nations.

League of Nations.

Yalta Agreement.

Bretton Woods Agreement.

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Question 4

Free

Multiple Choice

Another name for the International Bank for Reconstruction and Development is:

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the Recon Bank.

the European Monetary System.

the Marshall Plan.

the World Bank.

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Question 5

Free

Multiple Choice

The International Monetary Fund (IMF):

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in recent years has provided large loans to Russia, South Korea, and Brazil.

was created as a result of the Bretton Woods Agreement.

aids countries with balance of payment and exchange rate problems.

is all of the above.

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Question 6

Multiple Choice

One of the innovations introduced by Bretton Woods was the creation of the Special Drawing Right or SDR. The SDR is an international reserve asset created by the:

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U.S. Department of the Treasury.

International Bank of Reconstruction and Development (IBRD).

World Bank (WB).

International Monetary Fund (IMF).

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Question 7

Multiple Choice

Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods?

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widely divergent national monetary and fiscal policies among member nations

differential rates of inflation across member nations

several unexpected economic shocks to member nations

all of the above

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Question 8

Multiple Choice

Which of the following statements is NOT true?

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The Gold Standard Era was characterized by growing openness in trade, but limited capital mobility.

The time period between World Wars I and II (the inter war years) witnessed significant reductions in trade barriers and a rapid acceleration in international trade.

The Bretton Woods Era (post WWII) realized the increasing benefits of open economies. Furthermore, trade was increasingly dominated by capital.

Since March 1973, exchange rates have become much more volatile and less predictable than previous periods.

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Question 9

Multiple Choice

A review of the evolution of the Global Monetary System shows that capital flows dominate trade in which of the following eras EXCEPT:

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Classical Gold Standard.

Fixed Exchange Rates, 1945-1973.

The Floating Era, 1973-1997.

The Emerging Era, 1997-Present.

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Question 10

Multiple Choice

Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, a country that has given up their own sovereignty over monetary policy is considered to have:

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a residual agreement.

hard pegs.

soft pegs.

floating arrangements.

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Question 11

Multiple Choice

Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, countries with "fixed exchange rates" are considered to have:

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a residual agreement.

soft pegs.

hard pegs.

floating arrangements.

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Question 12

Multiple Choice

A small economy country whose GDP is heavily dependent on trade with the United States could use a(n) ________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.

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pegged exchange rate with the United States

pegged exchange rate with the Euro

independent floating

managed float

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Question 13

Multiple Choice

Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, currencies that are predominantly market-driven are considered to be:

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soft pegs.

hard pegs.

floating arrangements.

a residual agreement.

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Question 14

Multiple Choice

Among IMF member countries since 2010, the dominating exchange rate regime has been:

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hard peg.

soft peg.

floating arrangements.

residual agreement.

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Question 15

True/False

Under the terms of Bretton Woods, countries tried to maintain the value of their currencies to within 1% of a hybrid security made up of the U.S. dollar, British pound, and Japanese yen.

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True

False

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Question 16

True/False

Members of the International Monetary Fund may settle transactions among themselves by transferring Special Drawing Rights (SDRs).

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True

False

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Question 17

True/False

Today, the United States has been ejected from the International Monetary Fund for refusal to pay annual dues.

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True

False

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Question 18

True/False

The euro is an example of a rigidly fixed system, acting as a single currency for its member countries. However, the euro itself is an independently floating currency against all other currencies.

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True

False

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Question 19

True/False

Although the contemporary international monetary system is typically referred to as a "floating regime," it is clearly not the case for the majority of the world's nations.

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True

False

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Question 20

True/False

The IMF's methodology for classifying exchange rate regimes today is based on the official policy statement of the respective governments, de jure classification.

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True

False

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