tbch18 - Chapter 18: The International Monetary System,...

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Chapter 18: The International Monetary System, 1870 – 1973 Multiple Choice Questions 1. Under the price-specie-flow mechanism, what happens when Germany’s current account surplus is greater than its non-reserve capital account deficits? A. German loans will finance all foreign net imports. B. There will be an automatic drop in German domestic prices and a rise in foreign prices. C. Gold reserves will flow into Germany. D. Gold reserves will flow out of Germany. E. None of the above. Answer: C 2. The “rules of the game” under the gold standard can best be described as which of the following? A. Selling domestic assets in a deficit and buying assets in a surplus B. Slowing down the automatic adjustments processes inherent in the gold standard C. Selling domestic assets in order to accumulate gold D. Selling foreign assets in a deficit and buying foreign assets in a surplus E. None of the above. Answer: A 3. A country seeking to maintain internal balance would be most concerned with A. attaining low levels of unemployment. B. ensuring that savings is weighted more toward domestic investment than the current account. C. large fluctuations in output. D. an adequate stock of gold reserves. E. None of the above. Answer: C 4. By internal balance, most economists mean A. only full employment. B. only price stability. C. full employment and price stability. D. full employment and moderate increase in prices. E. None of the above. Answer: C 22
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5. By external balance, most economists mean A. avoiding excessive imbalances in international payments. B. a balance between exports and imports. C. a balance between trade account and service account. D. a fixed exchange rate. E. None of the above. Answer: A 6. Which one of the following statements is true? A. Inflation but not deflation can occur even under conditions of full employment. B. Deflation but not inflation can occur even under conditions of full employment. C. Inflation or deflation can occur even under conditions of full employment. D. Inflation can occur even under conditions of full employment only in the long run E. None of the above. Answer: C 7. Which one of the following statements is true? A. Inflation can occur even under conditions of full employment only if the central bank continues to inject money into the economy. B. Inflation can occur even under conditions of full employment only if the central bank continues to withdraw money from the economy. C. Deflation can occur even under conditions of full employment only if the central bank continues to inject money into the economy. D. Inflation cannot occur even under conditions of full employment if the central bank continues to inject money into the economy. E.
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tbch18 - Chapter 18: The International Monetary System,...

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