Question : 91.From mid-2008 through early 2009, the value of the dollar : 1299398

 

91.From mid-2008 through early 2009, the value of the dollar moderately increased against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. Which of the following was a reason for this phenomenon? 

A. High real interest rates in the United States compared to any other developed region in the world sparked an inflow of funds into the country.

B. U.S. assets were characterized by a high-risk, high-return payoff which prompted foreign investors to park their funds.

C. Foreign investors were excited at the possibility of high returns following the government bail-out of financial institutions.

D. Foreign investors put their money in low-risk U.S. assets such as low-yielding U.S. government bonds.

E. Foreign investors saw opportunities in the United States as the level of indebtedness had begun to reduce.

92.The frequency of government intervention in the foreign exchange market explains why the current system is sometimes thought of as a(n) _____. 

A. fixed exchange rate system

B. managed-float system

C. gold standard system

D. flexible exchange rate system

E. pegged exchange rate system

93.A _____ refers to a system under which some currencies are allowed to float freely, but the majority are either managed by government intervention or pegged to another currency. 

A. managed-float system

B. pegged exchange rate system

C. fixed exchange rate system

D. floating exchange rate system

E. gold standard system

94.Which of the following is a characteristic of the floating exchange rate regime? 

A. It allows for automatic trade balance adjustments.

B. The use of monetary policy by the government is restricted.

C. It allows for greater monetary discipline.

D. It limits the destabilizing effects of exchange rate speculation.

E. It eliminates volatility and uncertainty associated with exchange rates.

95.Which of the following is an argument for a fixed exchange rate system? 

A. Governments can contract their money supply without worrying about the need to maintain parity.

B. Trade balance adjustments do not require the intervention of the International Monetary Fund.

C. It ensures that governments do not expand the monetary supply too rapidly, thus causing high price inflation.

D. Speculations in exchange rates boost exports and reduce imports.

E. Each country should be allowed to choose its own inflation rate.

96.Which of the following is true of monetary contraction in a fixed exchange rate system? 

A. It requires low interest rates.

B. It increases the demand for money.

C. It puts downward pressure on a fixed exchange rate.

D. It leads to an inflow of money from abroad.

E. It can lead to high price inflation.

97.Under the Bretton Woods system, if a country developed a permanent deficit in its balance of trade that could not be corrected by domestic policy, this would require the: 

A. country to import more than it exports.

B. country to make its exports more expensive.

C. International Monetary Fund to agree to a currency devaluation.

D. government to expand monetary supply in the economy.

E. government to involve in activities that led to exchange rate appreciation.

98.Which of the following is an argument for a floating exchange rate system? 

A. Each country should be allowed to choose its own inflation rate.

B. Speculation in exchange rates dampens the growth of international trade and investment.

C. Unpredictability of exchange rate movements makes business planning difficult.

D. Removal of the obligation to maintain exchange rate parity destroys a government’s monetary control.

E. Trade deficits can be determined by the balance between savings and investment in a country, not by the external value of its currency.

99.In comparison to a floating exchange rate regime, a fixed exchange rate system is characterized by: 

A. smoother trade balance adjustments.

B. increased destabilizing effects of exchange rate speculation.

C. greater autonomy in terms of monetary policy.

D. higher monetary discipline.

E. greater exchange rate uncertainty and volatility.

100.Critics of floating exchange rates claim that trade deficits are determined by the: 

A. balance between savings and investment in a country.

B. external value of the currency of a country.

C. exchange rates of other currencies.

D. valuations made by International Monetary Fund and the World Bank.

E. mechanism of competitive currency devaluation.

 

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