FINC 627.13 Summer 2016
Solutions to Quiz 1

Version A

Page 1

1) Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange regime was
a)
b)
c)
d)

US$ 1 = £4.8665
US$1 = £0.2055 
£1 = US$ 0.2055 none of the above

2) According to the concept of "Impossible Trinity", if a country chooses to have a pure floating exchange rate regime, which two of the three goals is a country most able to achieve?
a)
Monetary independence and exchange rate stability
b) Exchange rate stability and full financial integration
c)
Full financial integration and monetary independence

d) A country cannot attain any of the exchange rate goals with a pure float exchange rate regime.

3) A small economy country whose GDP is heavily dependent on trade with Spain could use a (an) ________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.
a)
b)
c)
d)

pegged exchange rate with the United States pegged exchange rate with the Euro

independent floating managed float

4) The ________ includes all international economic transactions with income or payment flows occurring within the year.
a)
Capital account
b) Financial account
c)
Current account

d) IMF account

5) Which of the following groups of countries have replaced their individual currencies with the Euro?
a)
b)
c)
d)

France, Germany, Italy, United Kingdom, Austria
France, Germany, Belgium, United Kingdom, Switzerland
Norway, Estonia, Finland, Luxembourg, France
Cyprus, Estonia, Finland, France, Netherlands


6) Based on the following information, calculate Brazil's Current Account Balance (Numbers in millions of US dollars)
Goods