Chapter 18 International Trade and Finance

| November 9, 2018

20)
A currency system in which exchange rates are determined in free markets is
called a
A)
fixed exchange rate system.
B)
gold standard.
C)
flexible exchange rate system.
D)
all of the above

21)
Under the Bretton Woods system
A)
all nations fixed the value of their currencies against the dollar.
B)
the United States was the only nation with a fixed exchange rate.
C)
the United States was the only nation with floating exchange rates.
D)
all nations allowed the value of their currencies to be determined by the free
market.

22)
Under a fixed exchange rate system, if the inflation rate in the United States
is 5% a year and the inflation rate in Australia is 0% a year, then the U.S.
real exchange rate will
A)
remain constant.
B)
increase 5% a year.
C)
decrease 5% a year.
D)
possibly increase or decrease.

23)
Under a fixed exchange rate system, if the inflation rate in the United States
is 0% a year and the inflation rate in Australia is 5% a year, then the U.S.
real exchange rate will
A)
remain constant.
B)
increase 5% a year.
C)
decrease 5% a year.
D)
may increase or decrease.

24)
Under a fixed exchange rate system, if the inflation rate of the United States
exceeds the inflation rate of other nations, the
A)
dollar will depreciate.
B)
dollar will appreciate.
C)
United States will develop a trade deficit.
D)
United States will develop a trade surplus.

25)
Under a fixed exchange rate system, if the inflation rate of the United States
is less than the inflation rate of other nations, the
A)
dollar will depreciate.
B)
dollar will appreciate.
C)
United States will develop a trade deficit.
D)
United States will develop a trade surplus.

Recall
the Application about how the collapse of the housing boom and the worldwide
recession of 2007 led to problems for some countries in the Euro-zone to answer
the following question(s). When the euro was launched in 1999, the vision of
its founders was to use the monetary union to further unify Europe economically
and politically. They envisioned a large
economic market, comparable to the United States with integrated goods and
financial markets. They believed that
by moving to a single currency with agreements on a number of fiscal rules that
they could achieve economic stability and growth.

26)
Recall the Application. Unlike the Euro-zone, the United States does not just
have a single currency, but also has a ________ that provides transfers to
areas in economic distress.
A)
single central bank
B)
national trade agreement
C)
unified fiscal system
D)
federally funded emergency account

27)
Recall the Application. The European nations that adopted the euro as a common
currency no longer have their own central banks and are therefore no longer
able to conduct their own independent
A)
fiscal policy.
B)
monetary policy.
C)
international investment.
D)
trade policy.

28)
Recall the Application. Greece faced a major financial crisis in 2010 as its
budgetary imbalance became quite severe. Since Greece is a member of the
Euro-zone, it could no longer ________ as a potential solution to its financial
problems.
A)
depreciate its currency
B)
cut spending
C)
raise taxes
D)
reduce wages and prices

29)
Foreign exchange market intervention involves the purchase or sale of
currencies by governments to influence the market exchange rate.

Get a 20 % discount on an order above $ 40
Use the following coupon code:
LOBSTER
Positive SSL