Chapter 2: International Monetary System

Question in the test bank follow the order of the chapter outline: Evolution of the International Monetary System The Current Exchange Rate Arrangements European Monetary System The Euro and the European Monetary Union The Mexican Peso Crisis The Asian Currency Crisis The Argentine Peso Crisis Fixed versus Flexible Exchange Rate Regimes

Evolution of the International Monetary System

1. The international monetary system can be defined as the institutional framework within which a) international payments are made. b) movement of capital is accommodated. c) exchange rates among currencies are determined. d) all of the above
Answer: d)

2. Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms to a) carefully manage their exchange risk exposure. b) carefully measure their exchange risk exposure. c) both a) and b)
Answer: c)

3. The international monetary system went through several distinct stages of evolution. These stages are summarized, in alphabetic order, as follows: (i)- Bimetallism (ii)- Bretton Woods system (iii)- Classical gold standard (iv)- Flexible exchange rate regime (v)- Interwar period

The chronological order that they actually occurred is: a) (iii), (i), (iv), (ii), and (v) b) (i), (iii), (v), (ii), and (iv) c) (vi), (i), (iii), (ii), and (v) d) (v), (ii), (i), (iii), and (iv)
Answer: b)

Bimetallism: Before 1875

4. In the United States, bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873, a) when Congress dropped the silver dollar from the list of coins to be