#1
What is a currency peg?
A currency with a fixed exchange rate to another currency
ExplanationMaintains a fixed value relative to another currency.
#2
Which country does not use the euro as its official currency among the options?
Switzerland
ExplanationUses Swiss Franc instead of the euro.
#3
What is the primary function of the World Bank in the international financial system?
Providing financial assistance for development projects
ExplanationFunding projects in developing countries.
#4
Which term refers to a sudden and significant decline in the value of a currency?
Depreciation
ExplanationRapid decrease in currency value.
#5
What is the primary function of the Gold Standard in the international monetary system?
Using gold as a medium of exchange
ExplanationCurrency value tied to gold reserves.
#6
Which international monetary system was established after World War II?
Bretton Woods System
ExplanationPost-WWII monetary system fixing currencies to the US dollar.
#7
What is the primary function of the International Monetary Fund (IMF)?
Providing financial assistance to member countries
ExplanationMainly offers loans to countries facing economic crises.
#8
What is the role of Special Drawing Rights (SDRs) in the International Monetary Fund?
A global reserve currency
ExplanationSupplementary reserve asset used in IMF transactions.
#9
What is the primary objective of a currency board?
Maintaining a stable exchange rate
ExplanationEnsuring fixed exchange rates with a foreign currency.
#10
What is the Plaza Accord, signed in 1985, primarily aimed at achieving?
Stabilizing exchange rates
ExplanationAgreement to stabilize currency rates.
#11
Which term refers to a situation where a country's currency is worth more than its actual value based on economic fundamentals?
Overvaluation
ExplanationCurrency value exceeds its economic worth.
#12
Which international organization is responsible for overseeing the stability of the global financial system?
Bank for International Settlements (BIS)
ExplanationEnsures stability and cooperation among central banks.
#13
Which of the following is a characteristic of a floating exchange rate system?
Exchange rates determined by supply and demand
ExplanationRates fluctuate based on market forces without intervention.
#14
In the context of exchange rates, what does the term 'devaluation' mean?
Decrease in the value of a currency
ExplanationReduction in the currency's value against others.
#15
Which agreement marked the transition to the current international monetary system with freely floating exchange rates?
Plaza Accord
ExplanationAgreement to depreciate the US dollar.
#16
In the context of exchange rates, what is the difference between appreciation and revaluation?
Appreciation is a market-driven increase, revaluation is a deliberate increase by authorities
ExplanationAppreciation due to market forces, revaluation by authorities.
#17
What is the Trilemma in international economics?
The challenge of maintaining stable exchange rates, free capital movement, and independent monetary policy simultaneously
ExplanationInability to have all three simultaneously.
#18
What is the primary difference between a fixed exchange rate system and a pegged exchange rate system?
Fixed rates are determined by the market, while pegged rates are set by central authorities
ExplanationMarket determines fixed rates, authorities set pegged rates.
#19
In a managed float exchange rate system, who typically intervenes in the foreign exchange market to influence the value of the currency?
Central bank of the country
ExplanationCentral bank regulates currency value within a range.