Topic 5 International Monetary System and Foreign Exchange

What determines a country's borrowing power from the IMF?

• country size

• loan size

• a quota

• the World Bank

The ________ refers to an international monetary system in which countries agreed to buy or sell their paper currencies in exchange for gold on the request of any individual or firm and to allow the free export of gold.

• free exchange system

• free market system

• gold standard

• mercantilism

A(n) ________ is the price of one currency in terms of a second currency.

• export rate

• exchange rate

• excise tax rate

• interest payment

Under the ________, each country pegged the value of its currency to gold.

• mercantilism

• gold standard

• econometrics

• factor endowment theory

The purpose of the ________ is to oversee the functioning of the international monetary system.

• World Bank

• International Bank for Reconstruction and Development

• International Development Association

• International Monetary Fund

Countries that want to join the IMF must ________.

• pay a quota

• pay each of the existing members an entrance fee

• agree to allow IMF conditionally

• recognize the importance of the US

Dirty float is another term for ________.

• flexible float

• managed float

• illegal float

• par value

Under a floating exchange rate system, what determines the exchange rate for each currency?

• a currency's par value

• the gold standard

• its pegged value

• the forces of supply and demand

Under a managed float ________.

• currency values are determined only by private sector market forces

• central banks sometimes manipulated exchange rates

• countries agree to buy or sell their paper currencies for gold

• the dollar’s value was allowed to fall on currency markets

Platinum was used as a medium of international exchange in ancient times because of its strength and value.

• True

• False