Hedge is A) a financial strategy that reduces the chance of suffering losses arising fro
A) a financial strategy that reduces the chance of suffering losses arising from foreign exchange risk.
B) a shock absorber.
C) management of flexible exchange rates.
D) changing the value of a nation's currency.
92) The exchange rate system in use since the early 1970s is best described as a
A) dollar standard.
B) adjustable peg system.
C) fixed exchange system.
D) freely floating or managed "dirty" floating exchange rate system.
93) Research on managed exchange rates by economists Bordo and Schwartz shows that dirty floats
A) have very large and significant effects on the values of world currency.
B) are trivial in size relative to total currency trading and have little if any effect.
C) are having an increasingly more powerful role in the world money markets.
D) are more successful when used by G-8 countries.
94) With a "dirty" floating exchange rate system,
A) market forces and the country's stock of gold determine its exchange rate.
B) central banks may intervene to affect the value of a country's currency.
C) market forces do not play a role in determining the value of a currency.
D) the International Monetary Fund and the Groups of Five and Seven determine fixed exchange rates.
95) The management of flexible exchange rates is also called
A) a dirty float.
B) the Bretton Woods system.
C) a fiscal fix.
D) a reserve-currency standard.
96) According to the empirical work on managed exchange rates by economists Bordo and Schwartz,
A) purchasing power parity is totally ineffective in explaining changes in exchange rates.
B) the G-7 nations are actually maintaining fixed exchange rates instead of managed floating exchange rates.
C) the Canadian central bank is dictating to the other G-7 countries what the exchange rates of the major currencies will be.
D) actions of the G-7 nations cannot influence exchange rates in the long run.
97) The current exchange rate system used by most industrialized countries is
A) either freely floating rates or a dirty float.
B) the gold standard.
C) fixed exchange rates.
D) freely floating exchange rates with no government intervention permitted.
98) Many economists doubt that G-7 nations cannot "manage" exchange rates because
A) the central banks do not know how to intervene in the exchange rate markets.
B) the world economy is inherently unstable.
C) Japan does not abide by the rules of the IMF.
D) exchange rate interventions are trivial relative to the size of the foreign exchange market.
99) Crawling peg is
A) managed flexible exchange rate.
B) a shock absorber.
C) hedge against foreign exchange risk.
D) an exchange rate arrangement in which a country pegs the value of its currency to the exchange value of another nation's currency but allows the par value to change at regular intervals.
100) An exchange rate target zone is
A) a range of floating exchange rates.
B) a range of permitted exchange rate variations between upper and lower exchange rates bands that a central bank defends by selling or buying foreign exchange reserves.
C) a range of fixed exchange rates.
D) a range of dirty floats.