Exam (elaborations)
BUSI 3250 EXAM 2 QUESTIONS AND ANSWERS 2024
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BUSI 3250 EXAM 2 QUESTIONS AND ANSWERS 2024
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BUSI 3250 EXAM 2With the gold standard, does the government have monetary flexibility? -
ANSWERS-No
Why doesn't the government have monetary flexibility using the gold standard? -
ANSWERS-A government cannot create money that is not backed by gold for
political advantage
The international monetary system in place from 1945 to 1971, with par value
based on gold and the U.S. dollar - ANSWERS-The Bretton Woods System
The Bretton Woods system is also called - ANSWERS-the gold exchange standard
and fixed rate system.
The Bretton Woods System set up the - ANSWERS-fixed exchange rates
Par value: - ANSWERS-stated value
currency's value is tied to the value of another currency or gold - ANSWERS-Fixed
exchange rate
Assets held by a nation's central bank, used to back up government liabilities -
ANSWERS-Reserves
,Reserves are also called - ANSWERS-central reserves
national currency that is also a reserve currency will eventually run a deficit,
leading to lack of confidence in the reserve currency and a financial crisis -
ANSWERS-Triffin paradox
The value of the SDR is based on 5 currencies a "traded weight basket": -
ANSWERS-the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and
the British pound sterling
Special Drawing Rights helps IMF - ANSWERS-manage the exchange rate volatility
the unit of account for the IMF and other international organizations - ANSWERS-
Special Drawing Rights
summary of triffin paradox - ANSWERS-don't peg gold to one currency. Therefore
special drawing rights were created
When a country government holds foreign reserves of a specific currency in an
account equal to its domestic currency supply and exchange the two at a fixed
rate - ANSWERS-Currency Board Agreement
One country adopts the currency of another or adopt a common currency.
Example euro (many countries adopting one currency), or US $ in Ecuador, El
, Salvador and other countries - ANSWERS-Exchange arrangement with no separate
legal tender
Conventional fixed-peg (or fixed-relationship) arrangement allows - ANSWERS-
Allows a currency' exchange rates with one or a basket of currencies to fluctuate
around a fixed rate with a narrow band of less than 1%
currency is readjusted periodically at a fixed, preannounced rate - ANSWERS-
Crawling peg
managed float by government - ANSWERS-Managed Floating
rely on market of supply and demand. Ex. US, Sweden, Canada, UK, Japan and
other EU countries - ANSWERS-Free Floating Exchanged Rate
Floating currencies can move against one another quickly and in large swings.
Causes include: - ANSWERS-political events, expectations, disasters and govt.
economic policies that encourage trade imbalances and deficits
The Bank for International Settlements is an institution for central bankers that is
owned by _______ central banks that account for _____% of world's GDP -
ANSWERS-63; 95%
Oldest international financial institution in world, created 1930 - ANSWERS-The
Bank for International Settlements
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