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2.3 Fixed versus Flexible exchange rates

Authored by Nhu Luong

Specialty

University

9 Questions

Used 3+ times

2.3 Fixed versus Flexible exchange rates
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1.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Based on the premise that, other things equal, countries would prefer a fixed exchange rate, which of the following statements is NOT true?

Fixed rates provide stability in international prices for the conduct of trade
Fixed exchange rate regimes necessitate that central banks maintain large quantities of international reserves for use in the occasional defense of the fixed rate.
Fixed rates are inherently inflationary in that they require the country to follow loose monetary and fiscal policies
Stable prices aid in the growth of international trade and lessen exchange rate risks for businesses

2.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Which of the following is NOT an attribute of the "ideal" currency?

monetary independence
full financial integration
exchange rate stability
All are attributes of an ideal currency

3.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

The authors discuss the concept of the "Impossible Trinity" or the inability to achieve simultaneously the goals of exchange rate stability, full financial integration, and monetary independence. If a country chooses to have a pure float exchange rate regime, which two of the three goals is a country most able to achieve?

monetary independence and exchange rate stability
exchange rate stability and full financial integration
full financial integration and monetary independence
country cannot attain any of the exchange rate goals with a pure float exchange rate regime

4.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

China today is a clear example of a nation that has chosen the following policies EXCEPT

control and manage the value of its currency
conduct an independent monetary policy
full financial integration in an attempt to stimulate its domestic economy
restrict the flow of capital into and out of the country

5.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

According to the terminology associated with changes in currency values, which of the following choices is the case when a currency's value relative to other currencies is changed by a government?

depreciation and revaluation
devaluation and appreciation
devaluation and revaluation
depreciation and appreciation

6.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Based on the premise that, other things equal, countries would prefer a fixed exchange rate: Variable rates provide stability in international prices for the conduct of trade

True
False

7.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

If exchange rates were fixed, investors and traders would be relatively certain about the current and near future exchange value of each currency.

True
False

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