628 #
© 2014 Pearson Canada Inc.#- An advantage of an international lender of last resort is its ability to prevent ____, in
which a successful speculative attack on one currency leads to attacks on others; its disadvantage
is the problem of ____ if creditors expect to be protected if a crisis occurs.
A) contagion; moral hazard
B) contagion; adverse selection
C) currency virus; moral hazard
D) currency virus; adverse selection
Answer: A
Diff: 1 Type: MC Page Ref: 510
Skill: Recall
Objective List: 20.4 Depict the role of the IMF as an international lender of last resort
20.6 International Considerations and Monetary Policy
In the early 1970s, the United States ran large balance of payments ____, causing an
____ dollar and an ____ German mark.
A) deficits; undervalued; overvalued
B) deficits; overvalued; undervalued
C) surpluses; undervalued; overvalued
D) surpluses; overvalued; undervalued
Answer: B
Diff: 1 Type: MC Page Ref: 512
Skill: Applied
Objective List: 20.2 Discuss international financial transactions and the balance of payments
In response to the overvalued dollar in the early 1970s, the German Bundesbank bought
____ and sold ____ to keep the exchange rate fixed, gaining international reserves.
A) marks; dollars
B) marks; pounds
C) dollars; marks
D) dollars; pounds
Answer: C
Diff: 1 Type: MC Page Ref: 512
Skill: Applied
Objective List: 20.2 Discuss international financial transactions and the balance of payments