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1INTERNATIONALFINANCEAssignmentProblems(4)Name:Student#:I.Choosethecorrectanswerforthefollowingquestions(onlyONEcorrectanswer)(3.5creditsforeachquestion,totalcredits3.5x20=70)1.Theexchangeratesystemrefersto__________.A.acountry’sinternaleconomicpoliciessuchasemployment,inflationandinterestratelevelsB.acountry’smonetarypoliciesC.acountry’sfiscalpolicesD.acountry’schoiceastowhichexchangerateregimesuchasfixedorfloatingorbetweentofollow2.Theinternationalmonetarysystemisbroadlydefinedas___________.A.thesetofconventions,rules,proceduresandinstitutionsthatgoverntheconductoffinancialrelationsbetweennationsB.thesetofrulestomanageeverycountry’scentralbanksC.thesetofrulestosolvetradedisputesbetweencountriesD.thesetofrulestodevelopworldeconomy3.Underthegoldstandard,theexchangeratewasfixedbecause__________.A.eachcurrencyunitcouldbeconvertedtoaweightofgoldB.thegoldcouldbeexportedandimportedwithnorestrictionsC.goldcoinscouldbefreelymintedD.alloftheabove4.Whenthegoldstandardprevailed,theUnitedStatesfixedthepriceofgoldat$20.646perounceandtheBritainfixedthepriceat4.252perounce.Nowsupposethefeesfortransportingoneounceofgoldwereapproximately$0.03persterlingofgold.Thentheexchangerateofdollarversussterlingwouldfluctuatebetween_________.A.$4.8856/₤and$4.8256/₤B.$4.9042/₤and$4.8070/₤C.$4.9770/₤and$4.7463/₤D.Wedon’tknow,becauseitdependsonthesupplyanddemandforcesintheforeignexchangemarket5.Underthegoldstandard,theparvalueoftheexchangeratewasdeterminedby__________.A.goldparityoftherelativecurrenciesB.interestrateoftherelativecurrenciesC.demandandsupplyforcesintheforeignexchangemarketD.inflationrateoftherelativecurrencies26.Whichofthefollowingistrueregardingthecollapseofthegoldstandardsystem?A.TheWorldWarIhadmanyEuropeancountriessuspendconvertibilityoftheircurrenciesintogold.B.ThepoliticalcostsofmaintainingtheovervaluedpoundweresogreatintheUnitedKingdom.C.Nationsfacing1929–1933worldwiderecessiondecidedtopursueobjectivessuchashigheremploymentratesandrealgrowthrates,ratherthantomaintaintheexchangevalueoftheircurrencies.D.Alloftheabovearethereasonsthatthegoldstandardfinallycollapsed.7.TheU.S.dollarwasdesignatedastheinternationalcurrencyininternationalsettlementsundertheBrettonWoodssystem.Thedollarwasacceptedbytherestoftheworldbecause__________.A.itcouldbeusedtopurchaseU.S.goodsandservicesB.itcouldbeconvertedtogoldatapriceof$35/ounceC.theU.S.wastheonlysuperpoweratthattimeD.theIMFforcedtherestoftheworldtousedollartosettleinternationaldebts8.TheprincipalfunctionoftheInternationalMonetaryFund(IMF)wasoriginallyto__________.A.actasasupranationalregulatoryagencyforallcountries’centralbanksB.lendtomembernationsexperiencingashortageofforeignexchangereservesC.financepostwarreconstruction,particularlyinEuropeandJapanD.reducetradebarriersandsettledisputesamongcountriesrelatingtocurrencynegotiations9.Before1971theexchangerateswereprettystablebecauseoftheBrettonWoodsAgreement.SoiftheparvalueoftheJapaneseYenandU.S.dollarwassetby¥100/$,theupperlimitandlowerlimitthatthisexchangeratewasallowedtofluctuatefreelywouldbe__________.A.¥101/$and¥99/$B.¥102.25/$and¥97.75/$C.¥105/$and¥95/$D.¥110/$and¥90/$10.Theincreaseinvalueofacurrencypeggedtogoldoranothercurrencyisknownas__________,A.appreciationB.depreciationC.revaluationD.devaluation11.Acountrythatregulatestherateatwhichitscurrencyisexchangedforallothercurrenciesisconsideredtohavea__________exchangeratesystem.3A.fixedormanagedB.floatingorflexibleC.currencyboardD.dollarization12.Whichofthefollowingistrueforthosewhoareinfavoroffloatingexchangeratesystem?A.Floatingexchangeratesensurebalance-of-paymentsequilibriumB.FloatingexchangeratesensuremonetaryautonomyC.FloatingexchangeratespromoteeconomicstabilityD.Alloftheabovearetrue.13.Sincetheadventoffloatingexchangeratesin1973ithasbecomeevidentthatauthoritieshavenotalwayslettheircurrencyfloatfreelybutrathertheyhavefrequentlyintervenedtoinfluencetheexchangerate.Thisfloatingexchangeratesystemisalsocalled__________.A.cleanfloatB.managedfloatC.dirtyfloatD.BothBandCarecorrect14.Oneofthebenefitsofthecreationofeuroisthatit__________.A.promotestradesandinvestmentsinthoseeuro-zonecountriesB.makesthoseeuro-zonecountriesavoidtheexchangeraterisksC.helpsthoseeuro-zonecountriesrestraininflationD.Alloftheabovearebenefitsforeuro-zonecountries.15.Whichofthefollowingcorrectlyidentifiesexchangeratesystemsfromlessfixedtomorefixed?A.independentfloating,currencyboard,crawlingpegsB.independentfloating,crawlingpegs,dollarizationC.independentfloating,currencyboard,managedfloatingD.dollarization,currencyboard,crawlingpegs16.Acurrencyboard’sforeignexchangereservesareequalto__________orslightlymoreofitsnotesandcoinsincirculation,assetbylaw.A.100%B.90%C.75%D.50%17.WhichofthefollowingfeaturesareNOTsharedbyindependentfloatingexchangeratesystem?A.Theexchangeratesaredeterminedbythemarketforces.4B.Theexchangeratesmaychangeminutebyminute.C.Thecentralbankhastomaintainlargequantitiesofforeignexchangereserves.D.Thecentralbankcanpursuedesiredmonetarypolicy.18.TheIMFconstitutionwasamendedtoallowmembernations