the economics of money, banking, and financial markets

616 #

© 2014 Pearson Canada Inc.#

28. 
    

    Under the Bretton Woods system, when a country adopted an expansionary monetary policy,
    thereby causing a balance of payments ____, the country would eventually be forced to
    implement ____ monetary policy.
    A) deficit; expansionary
    B) deficit; contractionary
    C) surplus; expansionary
    D) surplus; contractionary
    Answer: B
    Diff: 2 Type: MC Page Ref: 503
    Skill: Applied
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


29. 
    

    Because the United States was the reserve-currency country under the Bretton Woods
    system, it could run large balance of payments ____ without ____ significant amounts
    of international reserves.
    A) deficits; losing
    B) deficits; gaining
    C) surpluses; losing
    D) surpluses; gaining
    Answer: A
    Diff: 3 Type: MC Page Ref: 503
    Skill: Applied
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


30. 
    

    The Bretton Woods system was one in which central banks ____.
    A) bought and sold their own currencies to keep their exchange rates fixed
    B) agreed not to intervene in the foreign exchange market to maintain a fixed exchange rate
    regime that had existed prior to World War I
    C) agreed to limit domestic money growth to the average of the five largest industrial nations
    D) agreed to limit domestic money growth to the average of the seven largest industrial nations
    Answer: A
    Diff: 2 Type: MC Page Ref: 503
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


31. 
    

    The Bretton Woods system broke down in the early 1970s for all but one of the following
    reasons.
    A) Deficit countries losing international reserves were not willing to devalue their currencies.
    B) Surplus countries were not willing to revalue their currencies upwards.
    C) Surplus countries were not willing to pursue more expansionary policies.
    D) America had been pursuing an inflationary monetary policy to reduce domestic
    unemployment.
    Answer: A
    Diff: 2 Type: MC Page Ref: 503
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls