POLSCI 369 Chapter 8

The policy of the U.S. Federal Reserve to increase the money supply by purchasing hundreds of billions of dollars in bonds and mortgage-backed securities is called a) quantitative easing. b) crony capitalism. c) a Ponzi scheme. d) the Dodd-Frank Act.

a) quantitative easing.

What is "bitter medicine"? a) The fees major banks have imposed on customers to bring down bank debt b) Another name for austerity policies in Europe c) The U.S. TARP program d) A drink in honor of all the working class and poor who lost out during the financial crisis

b) Another name for austerity policies in Europe

Which term refers to a process in which investors quickly shift their funds out of a nation in search of a "safe harbor" for their investments? a) capital flight b) a balance of payments crisis c) a speculative attack on a currency d) a panic attack

a) capital flight

Which of the following statements about exchange rates is incorrect? a) Between 2008 and 2017, the euro appreciated against the U.S. dollar. b) Between 2000 and 2008, the U.S. dollar declined in value relative to the euro and renminbi. c) Between 2011 and 2017, the yen appreciated significantly against the U.S. dollar. d) After 2004, the Chinese government let the renminbi depreciate against the U.S. dollar

b) Between 2000 and 2008, the U.S. dollar declined in value relative to the euro and renminbi.

A toxic security is another name for a) bank mortgages and investments that lost a good deal of their value during the global financial crisis. b) credit default swaps. c) the U.S. version of SWFs. d) a new drink in honor of all the CEOs of major businesses who lost their jobs during the financial crisis.

b) credit default swaps.

Which leader complained that by holding (unofficially) weak U.S. dollars, his country was helping pay for the unpopular Vietnam War? a) Harold Wilson of Great Britain b) Mao Zedong of China c) Charles de Gaulle of France d) Lester Pearson of Canada

c) Charles de Gaulle of France

Which of the following statements about the financial crisis from 2007 to 2009 is incorrect? a) The U.S. Federal Reserve played the role of "lender of last resort." b) The Federal Reserve rescued AIG, one of the world's largest bank insurers. c) Under Obama, the U.S. Congress passed a $2 trillion stimulus spending package. d) The U.S. temporarily government gained majority ownership of General Motors (GM) and Chrysler.

c) Under Obama, the U.S. Congress passed a $2 trillion stimulus spending package.

Which indicator is most important when it comes to determining the balance of payments and whether or not a nation is going into debt? a) the balance of trade b) the capital account c) the current account d) none of the above

c) the current account

This event signaled the beginning of the Asian financial crisis in July of 1997: a) when foreign investors pulled most of their fund out of South Korea b) when the Thai government was overthrown in a military coup c) when the Thai government could no longer support the 25 to 1 value of the Thai baht to the U.S. dollar d) when the IMF signaled that Thailand's government was no longer worthy of credit

c) when the Thai government could no longer support the 25 to 1 value of the Thai baht to the U.S. dollar

Which of the following did the Dodd-Frank Act require? a) Prosecution of Wall Street insiders b) Modification of mortgages for struggling homeowners. c) Tighter limits on bank executives' pay and bonuses in exchange for government bailouts of banks d) Banks' holding of more capital and collateral in reserve

d) Banks' holding of more capital and collateral in reserve

Which of the following was not a characteristic of the fixed exchange rate system of the finance and monetary structure? a) The price of gold was fixed at $35 an ounce. b) The formal and informal rules of this system reflected a political bargain between the United States and Western Europe whereby the United States provided security to Western Europe in exchange for its acceptance of U.S. hegemony. c) The IMF used a variety of borrowing measures to regulate currency value adjustments. d) Currency values were allowed to adjust up or down freely according to supply and demand conditions in the market for the U.S. dollar.

d) Currency values were allowed to adjust up or down freely according to supply and demand conditions in the market for the U.S. dollar.

Since 1944, the role of the IMF in the monetary and finance structure has been a) to increase the amount of liquidity in the international financial system. b) to ensure a stable international monetary system. c) to help countries with balance of payments problems on a short-term basis. d) all of the above

d) all of the above