International Business by Charles Hill 12th Edition Test Bank

International Business by Charles Hill 12th Edition Test Bank

International Business, 12e (Hill)
Chapter 11 The International Monetary System

1) The international monetary system refers to the institutional arrangements that govern exchange rates.

Answer: TRUE
Explanation: The international monetary system refers to the institutional arrangements that govern exchange rates.
Difficulty: 1 Easy
Topic: The History of the Global Monetary System
Learning Objective: 11-01 Describe the historical development of the modern global monetary system.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

2) The gold standard called for fixed exchange rates against the U.S. dollar.

Answer: FALSE
Explanation: Pegging currencies to gold and guaranteeing convertibility is known as the gold standard. By 1880, most of the world’s major trading nations, including Great Britain, Germany, Japan, and the United States, had adopted the gold standard.
Difficulty: 1 Easy
Topic: The History of the Global Monetary System
Learning Objective: 11-01 Describe the historical development of the modern global monetary system.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
3) The fixed exchange rate system established at Bretton Woods failed due to speculative pressures on the U.S. dollar.

Answer: TRUE
Explanation: The U.S. dollar was the only currency that could be converted into gold in the fixed exchange rate system established at Bretton Woods. As the currency that served as the reference point for all others, the dollar occupied a central place in the system. The system failed when its key currency, the U.S. dollar, faced speculative pressure.
Difficulty: 2 Medium
Topic: The History of the Global Monetary System
Learning Objective: 11-01 Describe the historical development of the modern global monetary system.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation

4) Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.

Answer: FALSE
Explanation: In the Jamaica agreement, gold was abandoned as a reserve asset. The IMF returned its gold reserves to members at the current market price, placing the proceeds in a trust fund to help poor nations.
Difficulty: 1 Easy
Topic: The History of the Global Monetary System
Learning Objective: 11-01 Describe the historical development of the modern global monetary system.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation

5) Market forces have produced a stable dollar exchange rate under a floating exchange rate regime.

Answer: FALSE
Explanation: Under a floating exchange rate regime, market forces have produced a volatile dollar exchange rate. Governments have sometimes responded by intervening in the market—buying and selling dollars—in an attempt to limit the market’s volatility and to correct what they see as overvaluation or potential undervaluation of the dollar.
Difficulty: 1 Easy
Topic: The History of the Global Monetary System
Learning Objective: 11-01 Describe the historical development of the modern global monetary system.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
6) The agreement reached at Bretton Woods established the International Monetary Fund (IMF) and the World Bank.

Answer: TRUE
Explanation: The agreement reached at Bretton Woods established two multinational institutions—the International Monetary Fund (IMF) and the World Bank.
Difficulty: 1 Easy
Topic: The Role of the World Bank and the International Monetary Fund in the International Monetary System
Learning Objective: 11-02 Explain the role played by the World Bank and the IMF in the international monetary system.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation

7) After the agreement reached at Bretton Wood, the dollar was the only currency that could be convertible into gold.

Answer: TRUE
Explanation: Only the dollar remained convertible into gold—at a price of $35 per ounce. Each country decided what it wanted its exchange rate to be vis-à-vis the dollar and then calculated the gold par value of the currency based on that selected dollar exchange rate.
Difficulty: 1 Easy
Topic: The Role of the World Bank and the International Monetary Fund in the International Monetary System
Learning Objective: 11-02 Explain the role played by the World Bank and the IMF in the international monetary system.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation