GOVERNMENT IMPACT QUESTIONS ON RATES

1. Some countries that use __________ will maintain the value of their currencies in terms of a foreign currency or
group of currencies. a. fixed exchange rate regime b. fully floating exchange rate regime c. managed floating
exchange rate regime d. exchange rate anchor mode

2. Currently, the US dollar is being operated under which of the following exchange rate regimes? a.
fixed b. free floating c. managed float d. anchor rate

3. Under what exchange rate regime is the US dollar operating from 1944 to 1971? a. fixed b. free floating c.
managed float d. anchor rate

4. Which of the following strategies will be successful in neutralizing the Fed's intervention if they want to depreciate
the dollar? a. sell dollars in the money market and buy government bonds b. sell dollars in the money market
and sell government bonds c. buy dollars in the money market and buy government bonds d. buy dollars on the
money market and sell government bonds

5. Assuming the Fed wants to increase US exports, which of the following strategies would help increase exports?
US exports? a.
increase interest
rates b. increase the money supply by selling government
bonds c. lower interest rates d. reduce the money supply by
selling government bonds

6. Suppose the Fed wants to reduce inflation in the US. Which of the following strategies will help reduce inflation?
broadcast?
a. increase interest
rates b. increase the money supply by selling government
bonds c. lower interest rates d. reduce the money supply by
selling government bonds

7. The current Vietnamese exchange rate system can be described as a. Fully float
b. Managed float c. Fixed exchange rate system d. Mixed system

8. The European Monetary System is described as a. Fully float b. Rate target area c.
Incomplete float d. Managed float

9. Under a fixed exchange rate system, a country has a relatively higher rate of inflation than
the country with which it trades, a. The
balance of international payments will be in deficit because the prices of its goods become more
expensive b. The supply of domestic currency in the foreign exchange market will increase c. Increases
downward pressure on the local currency d. All of the above are true

10. A weak peso will most likely lead to a.

Increase employment and inflation in Mexico b.
Decrease unemployment but increase inflation in Mexico c.
Increase unemployment but reduce inflation in Mexico d.
Reducing unemployment and reducing inflation in Mexico

11. The Bretton Woods system collapsed partly due to a.

Oil crisis b. US monetary policy is too loose c. America's
trade deficit is too large d. The US no longer supports the
gold standard

12. Under a fixed exchange rate regime, the central bank keeps the value of money by a. Decrease money
supply for overvalued currencies, increase money supply for undervalued currencies b. Buy overvalued currencies
on the forex market, sell undervalued currencies on the forex market c. All of the above statements are correct d. All
of the above statements are incorrect
13. Which of the following is NOT a target of government intervention in the foreign exchange market a. Generate
exchange rate income b. Reducing instability in the economy c. Increase the competitiveness of exports d.
Reduce inflation

14. To increase the price of the Euro against the

dollar a. The Fed will sell dollars to buy Euros and the European Central Bank (ECB) will buy Euros with dollars b.
The Fed will sell dollars to buy Euros and the ECB will buy dollars in Euros c. The Fed will sell euros to buy dollars
and the ECB will sell dollars to buy euros d. The Fed will sell Euros to buy dollars and the ECB will buy Euros with

dollars

15. Fixed exchange rate policy a. force a

country to abandon the free flow of international capital b. can eliminate the
uncertainty of the exchange rate c. force a country to abandon independent
monetary policy d. is a model provided by the Fed

16. One of the FED's direct intervention tools in the money market is to sell dollars and buy foreign currencies to
make the US dollar depreciate. a. Right b. Wrong