ECO610 Quizzes Week 5 Quiz

Question 1

The costs of inflation have been most apparent in the post-war period in countries like

the United States.

Canada.

Correct!

Argentina.

Belgium.

Japan.

Question 2

Under flexible exchange rate regime, a money-induced

increase in U.S. prices causes an eventual depreciation of the foreign currencies against the dollar.

decrease in U.S. prices causes an immediate appreciation of the foreign currencies against the dollar.

Correct!

increase in U.S. prices causes an immediate appreciation of the foreign currencies against the dollar.

decrease in U.S. prices causes no change in foreign exchange rate.

increase in U.S. prices causes an eventual appreciation of the foreign currencies against the dollar.

Question 3

Offshore banking can take place at which institution?

agency office only

subsidiary bank only

foreign bank only

Correct!

agency office, subsidiary bank, and foreign bank

subsidiary bank and foreign bank

Question 4

Suppose one is offered a gamble in which you win $1,000 half the time but lose $1,000 half the time. Since in this case one is as likely to win as to lose the $1,000, the average payoff on this gamble—its expected value—is: 0.5 ∗ $1,000 + 0.5 ∗ (-$1,000) = 0. Under such circumstances:

risk lovers individuals will not take the gamble.

Correct!

risk lovers and risk neutral individuals may take the gamble.

risk neutral individuals will not take the gamble.

no one will take the gamble.

risk averse individuals will take the gamble.

Question 5

Which of the two features of the IMF Articles of Agreement helped promote flexibility in external adjustment?

IMF members argued against the use of floating exchange rates.

Correct!

IMF members contributed their currency to form a pool of resources that IMF could lend to countries in need and parities in the exchange rate against the dollar could be adjusted with agreement of IMF.

IMF members helped countries maintain full employment.

IMF allowed countries to attain internal balance.

New countries would enter the agreement if they fixed their exchange rate.

Question 6

The purpose of the Basel Committee was to:

achieve a better coordination between brokers and investment bankers.

achieve a better coordination between bond holder and bon issuers.

manipulate bank rates for more leverage profits.

Correct!

achieve a better coordination of the surveillance exercised by national authorities over the international banking system.

achieve a better coordination of domestic banking systems.

Question 7

Which of the following statements is true?

Bank failures only inflict serious financial harm on the macroeconomic stability of the economy.

Bank failures inflict serious financial harm on individual depositors, but fortunately do not harm the macroeconomic stability of the economy.

Correct!

Bank failures inflict not only serious financial harm on individual depositors, but also harm the macroeconomic stability of the economy.

Bank failures do not inflict serious financial harm on individual depositors.

Bank failures inflict serious financial harm on individual depositors.

Question 8

What is the nature of the trilemma that is encountered when choosing monetary arrangements?

Only two of the four aspects of internal and external balance can be accommodated simultaneously.

Only one of the three aspects of internal and external balance can be accommodated simultaneously.

Only three of the four aspects of internal and external balance can be accommodated simultaneously.

Correct!

Only two of the three aspects of internal and external balance can be accommodated simultaneously.

Only one of the four aspects of internal and external balance can be accommodated simultaneously.

Question 9

A convertible currency is a currency that may be freely exchanged for

only silver.

domestic assets.

Correct!

foreign currencies.

only copper.

national currency.

Question 10

A person holding dollar deposits during the devaluation of the dollar would

Correct!

suffer a monetary loss and see the foreign currency value of dollar assets decrease by the amount of the exchange rate change.

shift their wealth into domestic investments.

see the foreign currency value of dollar assets increase by the amount of the exchange rate change.

see no change in their investments.

enjoy a monetary gain.

Quiz Score: 10 out of 10