A sudden decrease in the U.S. price level

do not affect those with dollar debts.

A sudden decrease in the U.S. price level

makes creditors in DM better off.

A current account surplus

may pose no problem if domestic savings are being invested more profitably abroad than they would be at home.

poses a problem if domestic savings are being invested more profitably abroad than they would be at home.

may pose no problem if domestic savings are being invested less profitably abroad than they would be at home.

there is no relation between current account surplus and between savings and investment.

poses a problem if domestic savings are being invested less profitably abroad than they would be at home.

A current account deficit

may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future.

will not pose a problem, especially if it is accompanied by an expansionary fiscal policy.

may still pose a problem, even if the borrowed funds are channeled into productive domestic investment projects.

There is no relation between current account surplus and between savings and investment.

will pose a problem because the country is borrowing funds from the rest of the world that it won't be able to pay back later.

strong investment opportunities should invest more at home and less abroad.

strong investment opportunities should invest little at home and channel their savings into more productive investment activity abroad.

weak investment opportunities should invest more at home.

weak investment opportunities should invest little abroad.

countries with productive investment should invest exclusively at home.

Countries where investment is relatively

unproductive should be net exporters of currently available output.

productive should be net exporters of currently available output.

unproductive should be net importers of currently available output.

unproductive should be net exporters of future available output.

unproductive should focus on their internal balance.

Countries where investment is relatively

productive should have current account deficits.

productive should have current account surpluses.

unproductive should have current account surpluses.

productive should balanced current account surpluses.

productive should have low outputs.

Countries where investment is

relatively productive should have current account deficits.

relatively unproductive should have current account deficits.

relatively productive should have current account surpluses.

relatively productive should have balanced current accounts.

relatively unproductive should have balanced current accounts.

Governments prefer to avoid excessive current account surpluses because

an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income.

the returns to domestic savings are more difficult to tax than those on assets abroad.

an addition to the home capital stock may increase domestic unemployment and therefore lead to higher national income.

foreign investment in one firm may have beneficial technological spillover effects on other foreign producers that the investing firm does not capture.

domestic savings increase with more investment abroad.

The case of New Zealand, described in the text, is concerned with the country's

ability to sustain current account deficits.

prospects for long term growth.

unproductive industrial sector and its prospects for long run growth.

exchange rate volatility relative to other currencies.

The case of New Zealand, described in the text, concludes that a country's current account deficits are not sustainable if a country's

ability to sustain current account deficits is questionable.

prospects for long term economic growth are above its global deficit growth.

unproductive industrial sectors and its prospects for long run growth.

labor productivity is below that of most other countries.

exchange rate has fallen relative to other currencies.

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

restrictions on international capital movements

restrictions on the migration of labor

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

freedom of international capital movements

restrictions on the migration of labor

Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?

monetary policy oriented towards domestic goals

restrictions on the migration of labor

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

Only two of the three aspects of internal and external balance can be accommodated simultaneously.

Only three of the four aspects of internal and external balance can be accommodated simultaneously.

Only one of the three aspects of internal and external balance can be accommodated simultaneously.

Only two of the four aspects of internal and external balance can be accommodated simultaneously.

Only one of the four aspects of internal and external balance can be accommodated simultaneously.

Under the price-specie-flow mechanism, what happens when, say, Germany's current account surplus is greater than its non-reserve capital account deficits?

Gold reserves will flow into Germany.

German loans will finance all foreign net imports.

Automatic drop in German domestic prices and rise in foreign prices.

Gold reserves will flow out of Germany.

Germany will experience a deficit.

The "rules of the game" under the gold standard can best be described as which of the following:

selling domestic assets in a deficit and buying assets in a surplus.

slowing down the automatic adjustments processes inherent in the gold standard.

selling domestic assets in order to accumulate gold.

selling foreign assets in a deficit and buying foreign assets in a surplus.

selling domestic assets in a surplus.

L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, is

an allegorical rendition of the U.S. political struggle over gold.

an allegorical rendition of the U.S. political struggle over silver.

an allegorical rendition of the U.S. political struggle over copper.

an allegorical rendition of the U.S. political struggle over both silver and gold.

an allegorical rendition of the U.S. political struggle over indebted farmers.

Mercantilism held that

silver and gold were the mainstays of national wealth.

silver alone was the mainstay of national wealth.

gold alone was the mainstay of national wealth.

silver and gold are not important for national wealth of a country.

labor forces were the mainstay of national wealth.

The main policy goal for a country according to the mercantilists is

to create a continuing surplus in the balance of payments.

to create a one-time deficit in the balance of payments.

to create a continuing deficit in the balance of payments.

to create a one-time surplus in the balance of payments.

The view of mercantilists can be summarized as follows

to sell more to strangers yearly than we consume of theirs in value.

to sell less to strangers yearly than we consume of theirs in value.

to consume more of theirs in value than we sell to strangers.

to consume the same amount as theirs in value as we sell to strangers.

to sell gold and silver to strangers in exchange for services.

Until the United States Civil War, The Unites States had a

bimetallic monetary standard consisting of silver and gold.

silver-based monetary standard.

bimetallic monetary standard consisting of copper and silver.

bimetallic monetary standard consisting of copper and gold.

In L. Frank Baum's classic 1900 children's book, The Wonderful Wizard of Oz, the name "oz" is a reference to

an ounce (oz.) of gold or silver.

Under the gold standard era of 1870-1914

London was the center of the international monetary system.

Tokyo was the center of the international monetary system.

Paris was the center of the international monetary system.

Berlin the center of the international monetary system.

New York was the center of the international monetary system.

Under the gold standard era of 1870-1914

central banks tried to avoid sharp fluctuations in the balance of payments.

central banks tried to have sharp fluctuations in the balance of payments.

central banks tried to avoid sharp fluctuations in the current account of the balance of payments.

central banks tried to avoid sharp fluctuations in the trade account of the balance of payments.

central banks tried to avoid sharp fluctuations in the capital account of the balance of payments.

A country is said to be in balance of payments equilibrium, when the sum of its current and its

non-reserved capital accounts equals zero.

reserved capital accounts equals zero.

non-reserved capital accounts equals to the surplus in the capital account.

non-reserved capital accounts equals to the deficit in the capital account.

non-reserved capital accounts is higher than the total capital account balance.

Under the Gold standard, a country is said to be in balance of payments equilibrium when the current account balance is

financed entirely by international lending without reserve movements.

financed by international lending and with reserve movements.

financed entirely by international lending and past gold reserves.

financed entirely by gold reserves.

The price-specie-flow mechanism

is an automatic mechanism for assuring external balance under the gold standard.

is an automatic mechanism for assuring external balance under floating exchange rates.

is an automatic mechanism for assuring internal balance under floating exchange rates.

is an automatic mechanism for assuring internal balance under the gold standard.

is an automatic mechanism for assuring internal balance under mercantilism.

Under the gold standard

a perpetual surplus is impossible.

a perpetual surplus is possible.

a perpetual deficit is possible.

a perpetual surplus is impossible, but a perpetual deficit is possible.

a perpetual deficit is impossible, but a perpetual surplus is possible.

Under the gold standard

a shortage of currency leads to low domestic prices and a foreign payments surplus.

a shortage of currency leads to high domestic prices and a foreign payments surplus.

a shortage of currency leads to low domestic prices and a foreign payments deficit.

a shortage of currency leads to low domestic prices but leaves the foreign balance of payments at equilibrium.

a shortage of currency leads to a perpetual surplus.

The gold standard period was

between the first and second world wars.

following the second world war until 1970.

Once the United States Civil War broke out, the United States moved to a

paper currency, called the 'greenback.'

bimetallic monetary standard consisting of silver and gold.

bimetallic monetary standard consisting of copper and gold.

A policy of 'beggar-thy-neighbor' is a policy that

does not often benefits any country in the long run.

often benefits the home country in the long run.

often benefits the foreign country in the long run.

often benefits foreign country in the short run.

benefits the home country's neighbors in the long run.

The Great Depression that started in 1929 was

confined only to the United States.

confined only to the United States and Britain.

confined only to the United States and Europe.

Which one of the following statements is the MOST accurate? By the year 1932, the United States

and France alone held more than 70 percent of the world's monetary gold.

and Canada alone held more than 70 percent of the world's monetary gold.

and Germany alone held more than 70 percent of the world's monetary gold.

and Britain alone held more than 70 percent of the world's monetary gold.

Britain, and France alone held more than 70 percent of the world's monetary gold.

biggest deflations and output contractions are countries which stayed on the gold standard until 1936.

biggest deflations and output contractions are countries which were never on the gold standard until 1936.

biggest inflations and output contractions are countries which were on the gold standard until 1936.

lowest deflations and output contractions are countries which were on the gold standard until 1936.

biggest deflations and output increases are countries which were on the gold standard until 1936.

Which of the two features of the IMF Articles of Agreement helped promote flexibility in external adjustment?

IMF members contributed their currency to form a pool of resources that IMF could lend to countries in need and parities in the exchange rate against the dollar could be adjusted with agreement of IMF.

IMF members helped countries maintain full employment.

IMF allowed countries to attain internal balance.

New countries would enter the agreement if they fixed their exchange rate.

IMF members argued against the use of floating exchange rates.

The dollar of the United States became the postwar world's key currency because of all EXCEPT

the ease of transporting U.S. dollars compared with other currencies.

the early convertibility of the U.S. dollar in 1945.

the special position of the dollar under the Bretton Woods system.

the strength of the American economy relative to the devastated economies of Europe and Japan.

central banks naturally found it advantageous to hold their international reserves in the form of interest-bearing dollar assets.

IF Chap 8 (1)

Authored by Bich Tran

English

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A country seeking to maintain internal balance would be concerned

only with attaining low levels of unemployment.

primarily with ensuring that saving is weighted more towards domestic investment than the current account.

with large fluctuations in output or prices.

with maintaining an adequate stock of gold reserves.

with stabilizing employment levels globally.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

By internal balance, most economists mean

full employment.

price stability.

full employment and price stability.

full employment and moderate increase in prices.

full employment and high disposable income.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

By external balance, most economists mean

avoiding excessive imbalances in international payments.

balance between exports and imports.

balance between the trade and service accounts.

what amounts to fixed exchange rates.

imbalance in internal transactions.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following statements is TRUE?

Inflation but not deflation can occur even under conditions of full employment.

Deflation but not inflation can occur even under conditions of full employment.

Inflation or deflation can occur even under conditions of full employment.

Inflation can occur even under conditions of full employment only in the long run.

Inflation does not coincide with periods of high unemployment levels.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Inflation can occur under conditions of full employment

only if the central bank continues to inject money into the economy and the agents' expectations of inflation are supported by the bank's activities.

only if the central bank continues to inject money into the economy.

only if the central bank continues to withdraw money from the economy.

only if the central bank continues to inject money into the economy and all agents expect that inflation will not occur.

only if the central bank fails to inject money into the economy.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A sudden increase in the U.S. price level

makes those with dollar debts worse off.

makes those with dollar debts better off.

does not affect those with dollar debts.

makes those with foreign debts better off.

increases all dollar debts.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A sudden increase in the U.S. price level

makes creditors in dollars better off.

makes creditors in dollars worse off.

do not affect creditors in dollars.

makes creditors in DM worse off.

makes lenders worse off.

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