Question 1

______________ is a convertible currency used by monetary authorities in foreign exchange markets to keep the exchange rate from moving outside some predefined range.

Accepted Answer

An intervention currency is a convertible currency used by monetary authorities in foreign exchange markets to intervene and keep the exchange rate within a certain predefined range. Revaluation and devaluation currencies are not directly related to foreign exchange market interventions.

Question 2

An international monetary system can be evaluated in terms of the following except?

Accepted Answer

Transparency is more related to the operations and policies within financial institutions and markets rather than a direct criterion for evaluating an international monetary system. The adjustment process, confidence, and liquidity are key aspects to consider in the evaluation of such systems.

Question 3

Which international institution was created under the Bretton Woods system to provide borrowing facilities for nations in temporary balance-of-payments difficulties and for overseeing international trade conduct?

Accepted Answer

The International Monetary Fund (IMF) was created under the Bretton Woods system to provide borrowing facilities for nations in temporary balance-of-payments difficulties and for overseeing international trade conduct. The International Bank for Reconstruction and Development, International Development Association, and International Finance Corporation were also created under the Bretton Woods system, but their mandates were focused on development financing rather than balance-of-payments support and trade regulation.

Question 4

After 1958,which of the following was a measure undertaken by the United States to correct the rapidly growing balance-of-payments deficits?

Accepted Answer

After 1958, the United States undertook measures to correct the rapidly growing balance-of-payments deficits, one of which was to encourage exports. This was aimed at increasing the country's foreign exchange earnings and reducing the trade deficit.

Question 5

Which international institution was set up in 1956 to stimulate private investments in developing nations from indigenous and foreign sources?

Accepted Answer

The International Finance Corporation (IFC) was set up in 1956 to stimulate private investments in developing nations from indigenous and foreign sources. The other options, International Monetary Fund, International Bank for Reconstruction and Development, and International Development Association, have different objectives and functions.

Question 6

The repayment period for borrowing from the IMF is approximately how long?

Accepted Answer

The typical repayment period for borrowing from the International Monetary Fund (IMF) ranges from 3 to 5 years, allowing countries some flexibility to stabilize their economies before needing to repay the loans.

Question 7

Up to 1957,the U.S.deficits were small and the United States settled most of them in dollars.Nations with surplus were willing to accept dollars for what reason?

Accepted Answer

The U.S. stood ready to exchange dollars for gold at the fixed price of $35 an ounce. This made dollars a highly desirable currency as other countries could exchange their dollars for gold, which was highly valued at the time.

Question 8

Which international institution was set up in 1960 to make loans at subsidized rates to poorer developing countries?

Accepted Answer

The International Development Association (IDA) was set up in 1960 to make loans at subsidized rates to poorer developing countries. The International Monetary Fund (IMF) was established in 1944 to promote international monetary cooperation, exchange stability, and orderly exchange arrangements among member countries. The International Bank for Reconstruction and Development (IBRD) also known as the World Bank, was established in 1944 to assist in the reconstruction and development of member countries. The International Finance Corporation (IFC) was established in 1956 to promote private sector investment in developing countries.

Question 9

After the transition period ended,the Bretton Woods system required that the member countries implement all of the following except

Accepted Answer

The Bretton Woods system did not require member countries to remove restrictions on international liquid financial flows. It focused more on currency convertibility and trade restrictions.

Question 10

During which time period did the gold standard system operate?

Accepted Answer

The gold standard system operated primarily during the period of 1880-1914, when many countries adopted it as a monetary policy.

Question 11

What are the arrangements under which the IMF negotiated to borrow from the "Group of Ten" and Switzerland to augment its resources?

Accepted Answer

The IMF negotiated to borrow from the "Group of Ten" and Switzerland under the General Arrangements to Borrow (GAB). The GAB is a borrowing arrangement that allows the IMF to supplement its resources by borrowing from member countries or their central banks in exchange for their own currencies. This was done in the 1960s to address the issues of limited resources available to the IMF, and to ensure that it could respond quickly to balance of payments problems faced by member countries.

Question 12

Which of the following is a valid exchange rate classification?

Accepted Answer

The answer of Which of the following is a valid...

Question 13

_______ is a standard of international reserve classification.

Accepted Answer

A pure fiduciary standard is a system where currency value is not based on physical commodities like gold or silver, but rather on the trust and credit of the economy.

Question 14

____________ was in fact a gold-exchange standard that operated from the end of WWII until 1971?

Accepted Answer

The Bretton Woods system was established in 1944 and operated until 1971. It was a gold-exchange standard in which the value of the US dollar was pegged to gold, and other currencies were pegged to the US dollar. This system was designed to promote international trade and financial stability.

Question 15

The international monetary system refers to all of the following except?

Accepted Answer

Tariff, Quota, and NTBs affecting the volume of international trade belong to the trade policy area and not the monetary system. The international monetary system refers to the framework of rules, institutions, and procedures governing international payments and exchange rates. It includes standards for currency exchange rates, mechanisms for settling international accounts, and institutions for regulating the international financial system.

Question 16

What are the arrangements under which national central banks negotiate to exchange each other's currency to be used to intervene in foreign exchange markets to combat international hot money flows?

Accepted Answer

The arrangements under which national central banks negotiate to exchange each other's currency to be used to intervene in foreign exchange markets to combat international hot money flows are referred to as Swap arrangements. Swap arrangements allow central banks to acquire foreign currency in exchange for their own currency, therefore, helping to stabilize the foreign exchange market by mitigating currency fluctuations. Examples of such arrangements include the Federal Reserve's swap lines with other central banks during times of financial crisis.

Question 17

By 2011,how many countries had become a member of the IMF?

Accepted Answer

As of 2011, 186 countries had become members of the International Monetary Fund (IMF). This information can be easily found on the IMF website or through a quick internet search. Option A (151) and option C (132) are both significantly lower than the actual number of countries that are members of the IMF, making them incorrect choices. Option D (113) is also lower than the actual number and is therefore an incorrect choice as well.

Question 18

Which international institution was established after WWII to provide long-run development assistance to developing nations?

Accepted Answer

The International Bank for Reconstruction and Development (IBRD) was established in 1945 after World War II to provide long-term development assistance to countries that were affected by the war. It is now a part of the World Bank Group and provides loans and technical assistance to developing countries for infrastructure and economic development projects. The International Monetary Fund (IMF) provides financial assistance to member countries experiencing balance of payments problems, while the International Development Association (IDA) provides concessional loans and grants to the world's poorest countries. The International Finance Corporation (IFC) invests in private sector development projects to promote economic growth and reduce poverty.

Question 19

Which of these statements about the International Monetary Fund is not true?

Accepted Answer

The IMF began operations on March 1, 1947, not 1950, and initially had 29 member countries, not 35.

Question 20

What are the arrangements under which member nations negotiate with the IMF for advance approval for future borrowings from the Fund so they will be immediately available?

Accepted Answer

Standby arrangements allow member nations to negotiate with the IMF for advance approval of future borrowings, making the funds immediately available when needed. General Arrangements to Borrow (A) are a set of credit arrangements between the IMF and a group of member countries that increases the IMF's lending capacity. Diminutive arrangements (B) and Swap arrangements (D) are not specific arrangements within the IMF.

Quiz 16: The International Monetary System: Past, present, and Future