INTERNATIONAL MONETARY SYSTEM

The ability of a country to profit from its ability to print money is known as:

• inflation.

• seigniorage.

• profiteering.

• dollarization.

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?

• Devaluation and revaluation

• Depreciation and revaluation

• Devaluation and appreciation

• Depreciation and appreciation

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.

• Stable prices aid in the growth of international trade and lessen exchange rate risks for businesses.

• Fixed rates are inherently inflationary in that they require the country to follow loose monetary and fiscal policies.

• Fixed exchange rate regimes necessitate that central banks maintain large quantities of international reserves for use in the occasional defence of the fixed rate.

World War I caused the suspension of the gold standard for fixed international exchange rates because of the war:

• lasted too long.

• cost too much money.

• interrupted the free movement of gold.

• used gold as the main ingredient in armament plating

What is the name of the exchange rate system in which countries allow the value of their currency to be determined freely in the foreign exchange markets around the world without any government restrictions?

• Euro

• Fixed exchange rate

• Floating exchange rate

• Dirty float exchange rate

The Bretton Woods agreement resulted in the creation of

• the Exim bank.

• the World Bank.

• the Federal Reserve Bank.

• the bancor as an international reserve asset.

A weak MYR is normally expected to cause:

• low unemployment and low inflation in Malaysia.

• high unemployment and low inflation in Malaysia.

• low unemployment and high inflation in Malaysia.

• high unemployment and high inflation in Malaysia.

Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market but does not adjust for the resulting change in the money supply. This is an example of:

• pegged intervention.

• indirect intervention.

• sterilized intervention.

• non-sterilized intervention.

If a country ties its currency to a specific foreign currency and allows its holdings of that currency to govern the country’s money supply, this arrangement is known as a ________.

• currency board

• monetary union

• floating exchange rate

• Special Drawing Right

How does a managed float exchange rate differ from a freely floating exchange rate?

• In a freely floating exchange rate, exchange rates are fixed by the government.

• In a managed float exchange rate, exchange rates are determined by market forces only.

• In a freely floating exchange rate, exchange rates are adjusted periodically by central bank intervention.

• In a managed float exchange rate, exchange rates are allowed to fluctuate within a range set by the central bank.