exchange rate systems and currency crises Mcqs
1. Under a pegged exchange rate system which does not explain why a country would have a balance of payments deficit ?
comments icon0

A. very high rates of inflation occur domestically

B. the domestic currency is undervalued relative to other currencies

C. technological advance is superior abroad

D. foreigners discriminate against domestic products

2. The exchange rate system that best characterizes the present international monetary arrangement used by industrialized countries is ?
comments icon0

A. freely fluctuating exchange rates

B. managed floating exchange rates

C. pegged or fixed exchange rates

D. adjustable pegged exchange rates

3. Which exchange rate system does not require monetary reserves for official exchange rate intervention ?
comments icon0

A. dual exchange rates

B. pegged exchanged rates

C. floating exchange rates

D. managed floating exchange rates

4. Which exchange rate system involves a leaning against the wind|| strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run ?
comments icon0

A. pegged of fixed exchange rates

B. adjustable pegged exchange rates

C. free floating exchange rates

D. managed floating exchange rates

5. Small nations with more than one major trading partner tend to peg the value of their currencies to ?
comments icon0

A. gold

B. a single currency

C. silver

D. a basket of currencies
6. Under adjustable pegged exchange rates, if the rate of inflation in the United States exceeds the rate of inflation of its trading partners ?
comments icon0
A. U.S imports tend to rise, and exports tend to fall

B. U.S exports tend to rise, and imports tend to fall

C. U.S foreign exchange reserves tend to rise

D. U.S foreign exchange reserves remain constant

7. Which exchange rate mechanism in intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions ?
comments icon0
A. dual exchange rates

B. managed floating exchange rates

C. crawling pegged exchange rates

D. adjustable pegged exchange rates

8. Small nations whose trade and financial relationships are mainly with a single partner tend to utilize ?
comments icon0

A. managed floating exchange rates

B. crawling exchange rates

C. pegged exchange rates

D. freely floating exchange rates

9. Which exchange rate mechanism calls for frequent redefining of the par value by small amounts to remove a payments disequilibrium ?
comments icon0

A. managed floating exchange rates

B. adjustable pegged exchange rates

C. crawling pegged exchange rates

D. dual exchange rate

10. Under managed floating exchange rates if the rate of inflation in the United States is less than the rate of inflation of its trading partners the dollar will likely ?
comments icon0

A. be officially revalued by the government

B. appreciates against foreign currencies

C. depreciates against foreign currencies

D. be officially devalued by the government