International F. System

One aspect of the international monetary system is the institutional arrangements that can govern or set exchange rates.

• True

• False

• I don't know

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The gold standard called for fixed exchange rates against the U.S. dollar.

• True

• False

• 

The agreement reached at Bretton Woods established the International Monetary Fund (IMF) and the World Bank.

• True

• False

• 

The International Monetary Fund’s original function was to provide a pool of money from which members could borrow in the short term.

• True

• False

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The IMF does not expect governments to meet any obligations except to pay back the money it borrows.

• True

• False

• 

Supporters of floating exchange rates...

• claim that trade deficits are not determined by the external value of currency.

• claim that trade deficits are determined by the balance between savings and investment in a country.

• argue that floating rates lead to a more stable world monetary system.

• argue that floating rates help adjust trade imbalances.

Which of the following arguments is against the use of fixed exchange rates?

• Market speculation can cause fluctuations in exchange rates.

• Each country has the freedom to choose its own inflation rate.

• Monetary discipline is the most important determinant of a strong economy.

• Governments are likely to expand the monetary supply far too rapidly due to political pressures.

Which of the following is a common criticism against the powerful International Monetary Fund?

• It did not try to resolve the Mexican currency crisis.

• IMF has not intervened to resolve the Asian crisis.

• It is hesitant to help banks when they are in crisis.

• IMF lacks any real mechanism for accountability.

A _____ is a situation in which a country cannot service its foreign debt obligations.

• moral crisis

• banking crisis

• foreign debt crisis

• currency crisis

Loans by the IMF are

• conditional loans.

• unconditional loans.

• include a macroeconomic policy that calls for lower interest rates.

• include a macroeconomic policy that calls for increases in public spending to improve infrastructure in a country