Multinational Financial Management by Alan Shapiro: The International Monetary System

CHAPTER 3
The International Monetary System

EASY (definitional)

3.1 The ________ is an exchange rate system that is relatively free from central bank and other government-type interventions.
a) managed float
b) clean float
c) dirty float
d) target-zone arrangement

Ans: b
Section: Free float
Level: Easy

3.2 When government intervention attempts to reduce for exporters and importers the uncertainty caused by disruptive exchange rate changes for the short and medium term, it is referred to as _________.
a) smoothing out daily fluctuations
b) leaning against the wind
c) unofficial pegging
d) a dirty float

Ans: b
Section: Managed float
Level: Easy

3.3 Under a _________, countries adjust their national economic policies to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.
a) managed float
b) ‘beggar-thy-neighbor” devaluation
c) dirty float
d) target-zone agreement

Ans: d
Section: Target-zone agreement
Level: Easy

3.4 ________ is nonconvertible paper money backed only by faith in the monetary authorities.
a) Specie
b) Fiat money
c) Seignorage
d) Par value

Ans: b
Section: The classical gold standard
Level: Easy

3.5 Under the classic gold standard, if prices began rising in the U.S.
a) the dollar value of the pound would rise
b) the dollar value of the pound would fall
c) the U.S. would begin running a balance of trade surplus
d) gold would flow out of the U.S. and the U.S. money supply would drop

Ans: d
Section: The classical gold standard
Level: Easy

3.6 The Bretton Woods system
a) ended in 1971
b) ended in 1939 when World War II began
c) is currently the basis for the international monetary system
d) is currently in use only by the major industrial nations

Ans: a
Section: Introduction
Level: Easy

3.7 The current exchange rate system can best be characterized as a _______ system.
a) free float
b) managed float
c) target-zone arrangement