#1
What is an exchange rate regime?
A set of rules governing foreign exchange markets
ExplanationDefines rules for currency valuation.
#2
Which of the following is a fixed exchange rate regime?
Pegged exchange rate
ExplanationCurrency value is fixed to another currency.
#3
Under a managed float exchange rate system, who intervenes in the foreign exchange market?
Both central banks and the government
ExplanationInvolvement from both state and central banks.
#4
What is a primary advantage of a floating exchange rate regime?
Flexibility in adjusting to economic conditions
ExplanationAbility to adapt to economic changes.
#5
What is a primary disadvantage of a fixed exchange rate regime?
Limited flexibility in monetary policy
ExplanationMonetary policy options are restricted.
#6
Which of the following is a benefit of adopting a flexible exchange rate regime?
Reduced exchange rate risk
ExplanationRisk of fluctuation is minimized.
#7
Under a floating exchange rate system, the currency value is determined by:
Market forces of supply and demand
ExplanationValue is dictated by market dynamics.
#8
What is a currency board?
A system where domestic currency is backed 100% by foreign reserves
ExplanationDomestic currency fully backed by foreign reserves.
#9
In the context of exchange rates, what does the term 'currency peg' mean?
A country's commitment to maintain the value of its currency at a fixed rate
ExplanationMaintains currency value at a fixed rate.
#10
What is the Plaza Accord?
An agreement to depreciate the U.S. dollar
ExplanationDeal to decrease the value of the USD.
#11
What is the main difference between a fixed and a pegged exchange rate regime?
Level of government intervention
ExplanationExtent of government involvement.
#12
Which of the following is a characteristic of a freely floating exchange rate regime?
Market-driven currency valuation
ExplanationValue determined solely by market.
#13
Which exchange rate regime provides a combination of fixed and floating exchange rates?
Managed float
ExplanationAllows for some flexibility but with interventions.
#14
What is the Trilemma in international economics?
A policy conflict involving exchange rates, monetary policy, and fiscal policy
ExplanationChallenge of balancing economic policies.
#15
Which country is known for adopting a dual exchange rate system?
Brazil
ExplanationUses different rates for different transactions.
#16
Under a currency board system, what backs the domestic currency?
Foreign currency reserves
ExplanationReserves of foreign currency support.
#17
Which exchange rate system is characterized by periodic adjustments to the official exchange rate?
Crawling peg
ExplanationGradual changes to fixed rate.
#18
Which country abandoned its fixed exchange rate regime during the European Exchange Rate Mechanism (ERM) crisis in 1992?
United Kingdom
ExplanationUK left fixed rates during ERM crisis.