International Business CH 6
30. _____ refers to a situation when a currency's value increases or decreases based on demand and supply. a. Float b. Trade deficit c. Exchange rate d. Reserve currency e. Bank reserve
A
44. The _____ removed gold as the primary reserve asset of the IMF. a. Jamaica Agreement b. Basel Convention c. Bonn Agreement d. Smithsonian Agreement e. Bretton Woods Agreement
A
The IMF has been criticized for: a. ignoring the dynamics of a country that they were dealing with. b. following a strict policy of non-intervention in the free market. c. imposing harsh economic sanctions against nations ruled by dictators. d. prolonged and unnecessary consultations with the affected countries while implementing policies. e. disbursing loans without any conditions to be fulfilled by the borrowing nation.
A
31. The major significance of the _____ was that it was the first formal institution that governed international monetary systems. a. Nixon Shock b. Bretton Woods Agreement c. Smithsonian Agreement d. World Trade Organization e. General Agreement on Tariffs and Trade
B
33. The Bretton Woods Agreement, with regard to currency conversion, established that: a. only major economic powers could convert their U.S. dollar holdings into gold. b. only governments could convert their U.S. dollar holdings into gold. c. only government accredited business organizations could convert their U.S. dollar holdings into gold. d. anyone could convert their U.S. dollar holdings into gold. e. only American businesses could convert their U.S. dollar holdings into gold.
B
42. Managed float system of exchange rates refers to a system in which currencies float against one another with: a. the G8 intervening only to stabilize the currencies at set target exchange rates. b. governments intervening only to stabilize their currencies at set target exchange rates. c. big business houses intervening only to stabilize the currencies at set target exchange rates. d. international financial institutions intervening only to stabilize the currencies at set target exchange rates. e. the developed countries intervening only to stabilize the currencies at set target exchange rates.
B
43. Which of the following is true of the Jamaica Agreement? a. It established the gold standard as the new international monetary system. b. It established the managed floating exchange rate system as the new international monetary system. c. It led to the devaluation of the U.S. dollar to $38 per ounce of gold, which increased the value of other countries' currencies to the dollar. d. It was a series of economic decisions made in 1971 that led to the demise of the Bretton Woods system. e. It was a series of economic decisions made in 1971 that led to the demise of the GATT agreement.
B
47. Which of the following is true of the Group of Five (G5)? a. Britain, France, Germany, Canada, and the United States were the founding members of this group. b. The reason for forming the group was the increasing value of the U.S. dollar, which pushed up the prices of U.S. exports, thereby increasing the trade deficit. c. The European Union was represented in G20 and could host or chair the group. d. The 1985 agreement of G5 was called the Jamaica Accord. e. The G5 was expanded in 1989 to include 20 countries.
B
62. Which of the following is true for the International Development Association (IDA)? a. It disburses loans to countries with the purpose of building economies and reducing poverty. b. It provides interest-free loans to countries with sovereign guarantees. c. It facilitates sustainable development by improving investments in the private sector. d. It focuses on improving the foreign direct investment of developing countries. e. It provides a means for dispute resolution between governments and private investors with the end goal of enhancing the flow of capital.
B
66. Which of the following is an issue on which the World Bank has been criticized? a. The shifting of the World Bank from being an international welfare organization to a "lender of last resort." b. The bank's lending policies which often reward macroeconomic inefficiency in the developing world. c. The attempt of the bank to focus on local initiatives rather than large projects. d. It entertains too many alternative perspectives on development, which jeopardizes its main objectives. e. It has allowed itself to be dominated and controlled by developing nations.
B
41. When Bretton Woods was established, the Americans initially proposed creating an international currency called _____ as the central currency. a. Wocu b. Ven c. unitas d. Bancor e. dollar
C
46. Identify the correct statement about the Louvre Accord. a. It focused on the establishment of the European Monetary System (EMS) and the creation of a single currency, the euro. b. It focused on the formulation of broad supervisory standards and guidelines and recommended statements of best practice in banking supervision. c. It focused on stabilizing the value of the dollar through collective efforts. d. It focused on forcing down the value of the U.S. dollar through collective efforts. e. It focused on establishing the U.S. dollar as the reserve currency through collective efforts.
C
52. The purpose of the International Monetary Fund is to: a. promote foreign direct investment into developing countries by insuring investors against political risk. b. promote sustainable private sector development primarily by financing private sector projects and companies located in the developing world. c. promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation. d. promote economic and social progress in developing countries by helping raise productivity so that their people may live a better and fuller life. e. provide facilities for the conciliation and arbitration of investment disputes between member countries and individual investors.
C
53. Which of the following is true of the economic policies that have to be implemented by a country in order to avail loans by the IMF? a. Increasing government borrowing b. Lowering interest rates to stabilize the currency c. Allowing failing firms to go bankrupt d. Nationalization of the country's assets e. Presence of regulated markets
C
60. Which of the following is true for the International Finance Corporation (IFC)? a. It disburses loans to countries with the purpose of building economies and reducing poverty. b. It provides interest-free loans to countries with sovereign guarantees. c. It facilitates sustainable development by improving investments in the private sector. d. It focuses on improving the foreign direct investment of developing countries. e. It provides a means for dispute resolution between governments and private investors with the end goal of enhancing the flow of capital.
C
61. The _____ focuses on improving the foreign direct investment of developing countries. a. International Bank for Reconstruction and Development b. International Development Association c. Multilateral Investment Guarantee Agency d. International Finance Corporation e. International Centre for Settlement of Investment Disputes
C
69. The brainchild of Swiss economics professor Klaus Schwab, _____, is an annual forum that the world's largest businesses attend with senior government officials from around the world and leaders of thought on economic, social, and political issues. a. Zurich b. Geneva c. Davos d. Bern e. Basel
C
34. The Bretton Woods Agreement provided for the devaluation of a currency to enable: a. countries to lower the prices of goods and services which would boost consumer spending. b. the United States to increase the concentration of manufacturing industries. c. countries to competitively manipulate imports and exports. d. countries to manage temporary but serious downturns. e. countries to put in effect the best trade practices.
D
35. Triffin Paradox refers to: a. the situation where the imposition of a tariff on imports may reduce the relative internal price of that good. b. the situation where technological progress that increases the efficiency with which a resource is used tends to increase the rate of consumption of that resource. c. the situation where the United States, the most capital-abundant country in the world, exported labor-intensive commodities and imported capital-intensive commodities. d. the situation where the more dollars foreign countries held, the less faith they had in the ability of the U.S. government to convert those dollars.
D
38. The _____, which devalued the U.S. dollar to $38 per ounce of gold, increased the value of other countries' currencies to the dollar, and increased the band within which a currency was allowed to float from 1 percent to 2.25 percent. a. Jamaica Agreement b. Basel Convention c. Bonn Agreement d. Smithsonian Agreement e. Barcelona Convention
D
39. When Bretton Woods was established, John Maynard Keynes, a highly influential British economic thinker, initially proposed creating an international currency called _____ as the main currency. a. Wocu b. Ven c. unitas d. Bancor e. dollar
D
45. Which of the following is true about the Plaza Accord? a. It focused on the establishment of the European Monetary System (EMS) and the creation of a single currency, the euro. b. It focused on the formulation of broad supervisory standards and guidelines and recommended statements of best practice in banking supervision. c. It focused on stabilizing the value of the dollar through collective efforts. d. It focused on forcing down the value of the U.S. dollar through collective efforts. e. It focused on establishing the U.S. dollar as the reserve currency through collective efforts.
D
58. The central purpose of the World Bank is to: a. promote foreign direct investment into developing countries by insuring investors against political risk. b. promote sustainable private sector development primarily by financing private sector projects and companies located in the developing world. c. promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation. d. end extreme poverty within a generation and boost shared prosperity. e. provide facilities for the conciliation and arbitration of investment disputes between member countries and individual investors.
D
67. The Millennium Development Goals refer to the seventeen international development goals that: a. all the nongovernmental organizations have pledged to achieve on their own as a protest against government inaction, ineptitude, and indifference. b. the business world has pledged to plan, work for, and achieve as a part of its ambitious corporate responsibility plan to make a better world. c. are outlined in the Tenth Five Year Plan by the Indian Planning Commission. d. all 193 United Nations member states agreed to achieve by the year 2030. e. the developed countries of the world have undertaken with the avowed aim of bringing about a qualitative change in the life of the people.
D
59. The World Bank consists of two main bodies which are the: a. Asian Development Bank and EBRD. b. Inter-American Development Bank and AFDB. c. World Trade Organization and GATT. d. International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). e. IBRD and the International Development Association (IDA).
E
5. The devaluation of the dollar by the United States in 1934 forced U.S. firms to export less as the price of their goods and services were higher vis-à-vis other nations.
False
6. The Bretton Woods Agreement was a new dollar-based monetary system, which did away with all the provisions of the gold standard.
False
8. Fixed exchange rates and pegged rates were the two different measures of the exchange rate, which were developed by the United States and the United Kingdom respectively.
False
11. The collapse of the Bretton Woods system greatly reduced the influence of the Bretton Woods Institutions in the international market.
false
16. The SDR is a currency, which constitutes a claim on the IMF.
false
24. If a country's currency increases in value, exports will become less expensive, thus making it difficult for other companies to compete effectively against that country's firms.
false
13. SDRs were created in 1969 by the IMF in response to the Triffin Paradox.
true
25. The local governments manage many of the projects that the World Bank Group funds in specific countries, but the actual work is typically done by a private sector firm.
true
