1. Floating exchange rate is determined by market forces
2. Pegged exchange-rate system is fixed against some standard of value
3. Fixed exchange rates are used primarily by small, developing nations and their currencies are anchored to a key currency
4. Under Floating (flexible) exchange rates, currency prices are established daily in the foreign-exchange market
5. Under the crawling-peg system there exists small and frequent changes in the par value of the currency
6. Currency crisis, speculative attack occur when:
a. A weak currency experiences heavy selling pressure
b. Sizable losses in the foreign reserves held by a country's central bank
c. Depreciating exchange rates in the forward market
d. Widespread flight out of domestic currency Into foreign currency
e. All of the above
7. Sources of currency crises are initiated by;
a. Currency speculators
b. Budget deficits financed by inflation
c. Weak financial systems
d. Recently deregulated financial systems
e. A weak economy
f. Political factors
g. External factors
h. All of the above
8. Dollarization is when residents of a foreign country use the U.S. dollar alongside or instead of the domestic currency
9. Full dollarization is the elimination of the domestic currency and its complete replacement with the U.S. dollar
10. American citizens planning a vacation abroad would welcome:
a. Appreciation of the dollar
b. Depreciation of the dollar
c. Higher wages extended to foreign workers
d. Lower wages extended to foreign workers
11. Small nations (e.g., the Ivory Coast) whose trade and financial relationships are mainly with a single partner tend to utilize:
a. Pegged exchange rates
b. Freely floating exchange rates
c. Managed floating exchange rates
d. Crawling pegged exchange rates
12.Small nations (e.g., Tanzania) with more than one major trading partner tend to peg the value of their currencies to:
a. Gold
b. Silver
c. A single currency
d. A basket of currencies
13. The U.S. dollar is generally regarded as the major "key currency" of the international monetary system.
14. Under a floating exchange-rate system, if the U.S. dollar depreciates against the Swiss franc:
a. American exports to Switzerland will be cheaper in francs
b. American exports to Switzerland will be more expensive in francs
c. American imports from Switzerland will be cheaper in dollars
d. None of the above
15. Today, fixed exchange rates are used primarily by small, developing countries that tie their currencies to a key currency such as the U.S. dollar.
16. If Mexico fully dollarizes its economy, it agrees to
a. Print pesos only to finance deficits of its national government
b. Use the U.S. dollar alongside its peso to finance transactions
c. Have the U.S. Treasury be in charge of its tax collections
d. Replace pesos with U.S. dollars in its economy
17. Small nations, such as Angola and Barbados, peg their currencies to the U.S. dollar since the prices of many of their traded goods are determined in markets in which the dollar is the key currency.