Ch 10 MC
About 25 percent of the world's official foreign exchange reserves are held in U.S. dollars
F
All countries of the world can simultaneously have balance-of-payments deficits.
F
As the main reserve currency of the world, the Euro serves as a medium of exchange, unit of account, and store of value.
F
Because the United States dollar is the main reserve currency of the world, the U.S. government must pay higher interest rates to foreigners who purchase its securities.
F
For the first time since World War II, the United States became a net international creditor in the mid-1980s and has remained so ever since.
F
In 2016, the Chinese yuan replaced the U.S. dollar as the main reserve currency of the world.
F
In recent years, most economists have argued that the U.S. dollar should be replaced by either the British pound or the Japanese yen as the world's main reserve currency.
F
The world economy is currently in approximate balance concerning consumption levels, savings rates, and fiscal deficits of advanced countries and emerging countries.
F
The official reserve assets of the United States consist of special drawing rights (SDRs), foreign currencies, gold, and drawings at the International Monetary Fund.
T
Because the rest of the world has accepted dollars, the United States has faced virtually no (or minimal) constraint on its ability to realize current-account deficits.
T
For the U.S. balance of payments statement, the sum of debits and credits on all transactions will always be equal--that is, the balance of payments always balances.
T
If the Special Drawing Right (SDR) was used as an international currency, the cost of doing business would likely go up for firms and investors. This is because another step would be added to international transactions, as buyers and sellers would have to convert their local currencies into SDRs.
T
If the U.S. dollar lost its position as the main reserve currency of the world, Americans would have to pay more for imported goods if the dollar depreciates when foreigners no longer buy dollars as they previously did when the dollar served as the reserve currency.
T
In recent years, China has proposed an overhaul of the international monetary system in which the Special Drawing Right (SDR) would eventually replace the dollar as the world's main reserve currency.
T
One problem of adopting the Special Drawing Right (SDR) as a reserve currency is that the SDR is backed by nothing other than the good faith and credit of the International Monetary Fund (IMF); that is, the IMF produces nothing to support the value of the SDR.
T
