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Test Bank Chapter 9 - M/C with answers
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9/12/24, 3:42 Test Bank Chapter 9 - M/C withPM answers
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Name TestBanks Chapter 9: Exchange Rate Crises: How Pegs Work and How They Break
Description Question pool for TestBanks Chapter 9: Exchange Rate Crises: How Pegs Work and How They Break
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Question
Although fixed exchange rates are desirable for many reasons, nations that adopt fixed exchange rates find that:
Answer fixed exchange rates are difficult to abandon once they become
established. flexible exchange rates actually offer a nation more
stability.
the success rate is often only a few years before the peg is broken.
intergovernmental agreements limit the fixed exchange rates to only a few
products.
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The average duration for a pegged exchange rate is about:
Answer 5 years.
10 years.
2 years.
indefinitely.
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The sudden collapse of a fixed exchange rate system is known as:
Answer an exchange rate
crisis. deflation.
an implosion.
a financial cave-in.
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Question
The depreciation in value of a nation's currency hits a crisis point when the decline in value exceeds:
Answer 50% for all nations.
10% for large nations and 20% for small
nations. 2% for all nations.
the rise in nominal prices and wages.
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An exchange rate crisis causes all of the following except:
Answer a large and sudden depreciation of the
currency. economic hardships.
political turmoil.
a sharp appreciation of the currency.
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An exchange rate crisis is defined as:
Answer a depreciation of 5–10% in a developing
economy. a depreciation of 10–15% in an
advanced country. a depreciation of 20–25%
in an emerging economy.
a depreciation of 10–15% in an advanced country and a depreciation of 20–25% in an emerging economy.
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,9/12/24, 3:42 Test Bank Chapter 9 - M/C with
PM answers
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,9/12/24, 3:42 Test Bank Chapter 9 - M/C with
PM One economic cost of an exchange rate crisis is: answers
Answer a decrease in the rate of inflation.
an increase in exports.
a slowing in a country's rate of economic growth. an
increase in employment.
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, 9/12/24, 3:42 Test Bank Chapter 9 - M/C with
PM answers
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Question
As evident from EU nations pegging to the German mark (before currency union) and nations pegging to the U.S. dollar:
Answer the mark was overvalued, while the dollar was undervalued.
when currency crises occur, they are more severe in emerging markets, yet they can affect both developing and
emerging market economies.
nations pegging their currencies to the mark had lower rates of interest, yet domestic credit volume was lower in
nations pegging t the dollar.
currency crises are very uncommon, yet when they occur, the media often makes too much of the issue in their
reports.
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Which of the following statements is correct?
Answer Exchange rate crises typically impose larger costs on advanced countries than on emerging-market
countries. Exchange rate crises typically impose larger costs on emerging-market countries than on
advanced countries.
Exchange rate crises typically impose the same costs on advanced countries and on emerging-
market countries. Exchange rate crises typically do not impose any costs on advanced countries.
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The effect of an exchange crisis on large nations compared to small ones is:
Answer less severe, with a better recovery in a shorter time period.
more severe, with a worse chance of full recovery in a shorter time
period. about the same in terms of recovery but not in terms of
unemployment.
more severe because the crisis affects interaction between a number of trading partners.
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In emerging markets, the reductions in growth of GDP as a result of exchange rate crises is:
Answer never very much.
not a problem because the IMF and World Bank make up the
difference. more than 50% per year.
about 10% of total GDP.
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A nation experiencing financial difficulties often has simultaneous crises. Which of the following is not typically concurrent for
such nations?
Answer a banking crisis
a default crisis
an exchange rate
crisis a climate
crisis
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Which of the following occurs during a banking crisis?
Answer Banks close or declare bankruptcy.
A government is unable to pay principal or interest on debt owed
to banks. No one wants to borrow from banks.
A country's central bank runs out of reserve currencies.
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Which of the following occurs during a default crisis?
Answer Banks close or declare bankruptcy.
A government is unable to pay principal or interest on debt owed
to banks. No one wants to borrow from banks.
A country's central bank runs out of reserve currencies.
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