Unit "Module 4: International Macroeconomic Policy

Question 1 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Under the Bretton Woods system, the confidence problem described

( )a lack of confidence that the U.S. dollar would be defined as the reserve currency.
( )a lack of confidence that the IMF would help the countries with current account deficits.
( )a lack of confidence that countries besides the U.S. would be able to maintain current account surpluses.
( )a lack of confidence that the U.S. would keep the price of gold in terms of the U.S. dollar fixed.
( )a lack of confidence that competitive devaluations would occur.

Question 2 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

The Economic and Monetary Union is not an optimum currency area because

( )it does not include all of the EU.
( )the mobility of capital and assets is too low.
( )it does not include enough countries.
( )it includes too many countries.
( )the mobility of workers is too low.

Question 3 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is NOT a valid argument for a flexible exchange rate regime?

( )A flexible exchange rate regime increases the efficiency of international trade.
( )A flexible exchange rate regime is symmetrical.
( )A flexible exchange rate regime permits monetary policy autonomy.
( )A flexible exchange rate regime automatically stabilizes aggregate demand and production.
(x)A flexible exchange rate regime allows countries to avoid importing inflation from other countries.

Question 4 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

The direct predecessor of the Economic and Monetary Union was the

( )Bretton Woods System.
( )Stability and Growth Pact.
( )Monetary Efficiency Gain.
( )Optimum Currency Area.
( )European Monetary System.

Question 5 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

During the 2000s, the U.S. maintained a large current account deficit. One cause of this was

( )high interest rates.
( )a falling value of the U.S. dollar.
( )high investment expenditure.
( )low saving in other countries.
()low consumption expenditure.

Question 6 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is NOT a lesson that economists have learned from the crises that have afflicted poor and middle income countries in the past few decades?

( )When failures in multiple markets exist, it is important to consider how liberalization or reform in one market will affect other markets.
( )Maintaining a fixed exchange rate avoids speculation and is the best way to prevent a financial crisis from occurring in the first place.
( )Maintaining a fixed exchange rate can hinder a central bank's ability to act as a lender of last resort.
( )A crisis in the banking sector can magnify economic problems for other sectors.
()Even healthy economies can be adversely affected by contagion.

Question 7 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following can be used to test if participants in the foreign exchange market are able to process available information?

( )Purchasing power parity.
( )The law of one price.
( )Risk aversion.
( )Nominal interest parity.
(x)None of the above.

Question 8 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Under a floating exchange rate regime, an increase in the demand for monetary assets is predicted to cause

( )an increase in production that is the same as would be the case under a fixed exchange rate regime.
( )a decrease in production that is smaller than would be the case under a fixed exchange rate regime.
()an increase in production that is smaller than would be the case under a fixed exchange rate regime.
( )an increase in production that is larger than would be the case under a fixed exchange rate regime.
( )a decrease in production that is larger than would be the case under a fixed exchange rate regime.

Question 9 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is NOT a motive for trading assets in the international capital market?

( )Reduction of risk.
( )Intertemporal trade.
()Avoidance of taxes.
( )Diversification.
( )Capital controls.

Question 10 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

A currency board

()can achieve exchange rate stability, but not capital mobility and effective monetary policy.
( )can achieve exchange rate stability and effective monetary policy, but not capital mobility.
( )can achieve effective monetary policy and capital mobility, but not exchange rate stability.
( )can achieve exchange rate stability and capital mobility, but not effective monetary policy.
( )can achieve exchange rate stability, capital mobility and effective monetary policy.

Question 11 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

An offshore currency deposit is

( )a deposit of euros and another currency.
( )a deposit of euros and dollars.
()a deposit denominated in a currency other than that of the country where the bank resides.
( )a deposit of currency that is used to pay for goods before they are imported.
( )a deposit of currency that is used to pay for goods after they are exported.

Question 12 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is NOT a typical feature of developing countries?

( )Few natural or agricultural resources.
( )A history of high inflation.
()Poorly functioning capital markets.
( )A history of government control of the economy.
( )Rampant corruption.

Question 13 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is a member of the European Union but not a member of the Economic and Monetary Union (the euro zone)?

( )Greece
( )United Kingdom
()Ukraine
( )Ireland
( )Greece

Question 14 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Under the Bretton Woods system

( )speculative flows of financial assets were terminated.
( )no country had independent monetary policy.
()all countries held gold as official international reserves.
( )the Federal Reserve System was responsible for holding enough gold to exchange for U.S. dollars.
( )all countries held dollars as official international reserves.

Question 15 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is true?

( )High income countries have about 10 times the income of low income countries.
( )Despite the theory of convergence, no poor countries have been able to catch up with rich countries.
( )Because of the theory of convergence, poor countries have consistently caught up with rich countries.
()There is a big difference in economic growth among different regions.
( )Evidence suggests that the richest economies are the most corrupt.

Score: 100.00%Score in test: 100.00% × 5.88 = 5.88%

Question 16 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following is NOT a form of finance for poor and middle income countries that want to borrow in international capital markets?

()Foreign direct investment.
( )Bonds issued by the government or the private sector.
( )Loans from commercial banks.
( )Portfolio investment in the equity of firms.
( )Money in circulation from the central bank.

Question 17 (Weight 5.88%) Unit "Module 4: International Macroeconomic Policy"

Which of the following could result from a current account deficit that is too large?

( )Growing foreign debt.
( )Excessive net outflows of financial assets.
( )Investment expenditure that is too low.
( )Government spending that is too low.
()Difficulties for domestic creditors in collecting their money.