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© 2014 Pearson Canada Inc.#
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
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
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
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