INTERNATIONAL FINANCE PRACTICE
EXAM QUESTIONS and ANSWERS
LATEST VERSIONS 2025 TOP RATED A+
Bretton woods and the IMF - CORRECT ANSWERS -following
world war 2, europe and rest of the world began
reconstruction
-allied powers met in bretton woods, NH and created post
war int money system
-agreement established a US dollar based monetary system
and created the IMF and World bank
-countries fixed their currencies in terms of gold
-only the US dollar remained convertible into gold
-therefore, each country established its exchange rate.
-"participating countries agreed to try to maintain currency
and values within 1% of par by buying or selling foreign or
gold reserves"
-known as "gold exchange standard" to help maintain
stability.
,The special drawing right (sdr) - CORRECT ANSWERS -
created by IMF to supplement participating countries
existing foreign exchange reserves
-base against which some countries peg their currency
-defined in terms of fixed qty of gold
-currently, weighted avg value of 5 countries of IMF having
largest exports
-individual countries hold SDR as deposits at the IMF and
settle IMF transaction through SDR transfers.
foreign exchange rates - CORRECT ANSWERS -Bretton
woods and IMF worked well post WW2, but diverging fiscal
and monetary policies and external shocks caused the
systems demise.
-confidence in the US dollar fell as the US ran consistent and
growing deficits in its balance of payments
-in less tan seven months, US lost nearly a third of its gold
reserves as players around the world exchanged the dollar
for gold.
-multiple devaluations in the US dollar put pressure to allow
dollar to float.
-this lack of confidence forced President Nixon to suspend
purchases or sales of gold
-exchange rates of most leading countries were allowed to
float in relation to the US dollar
,-dollar came into attack a year later and lost 10 percent of
value
-in 1973 a fixed rate system no longer seemed feasible and
the dollar along others was allowed to float.
floating era - CORRECT ANSWERS -exchange rates became
much more volatile and less predictable they were during
the fixed period
-several emerging market currency crises
-EMS restructuring and introduction of the Euro
emerging era - CORRECT ANSWERS growth in emerging
market economies and currencies
hard pegs - CORRECT ANSWERS -countries that have given
up their own sovereignty over monetary policy
-ex. dollarization or currency boards
soft pegs - CORRECT ANSWERS fixed exchange rates, with
five subcategories of classification
floating arrangments - CORRECT ANSWERS mostly market
driven, these may be free floating or floating with
ocassional govt intervention
, residual - CORRECT ANSWERS the remains of currency
arrangements that dont well fit previous categorizations
global ecletic - CORRECT ANSWERS -most developed
countries have floating currencies
-many emerging countries try to have a soft peg system but
were eventually forced to let them float.
todays global currencies - CORRECT ANSWERS -the
proportion of IMF member countries with floating regimes
has been holding at about 34%
-soft pegs continue to dominate
-although the contemporary international monetary system
is typically referred to as "floating regime", it is clearly not
the case for majority of world nations.
fixed vs flexible exchange rates - CORRECT ANSWERS -A
nations choice as to which currency regime to follow reflects
national priorities about all facets of the economy,
including: inflation, unemployment, interest rate levels,
trade balances and economic growth
-the choice between fixed and flexible rates may change
over time as priorities change.
EXAM QUESTIONS and ANSWERS
LATEST VERSIONS 2025 TOP RATED A+
Bretton woods and the IMF - CORRECT ANSWERS -following
world war 2, europe and rest of the world began
reconstruction
-allied powers met in bretton woods, NH and created post
war int money system
-agreement established a US dollar based monetary system
and created the IMF and World bank
-countries fixed their currencies in terms of gold
-only the US dollar remained convertible into gold
-therefore, each country established its exchange rate.
-"participating countries agreed to try to maintain currency
and values within 1% of par by buying or selling foreign or
gold reserves"
-known as "gold exchange standard" to help maintain
stability.
,The special drawing right (sdr) - CORRECT ANSWERS -
created by IMF to supplement participating countries
existing foreign exchange reserves
-base against which some countries peg their currency
-defined in terms of fixed qty of gold
-currently, weighted avg value of 5 countries of IMF having
largest exports
-individual countries hold SDR as deposits at the IMF and
settle IMF transaction through SDR transfers.
foreign exchange rates - CORRECT ANSWERS -Bretton
woods and IMF worked well post WW2, but diverging fiscal
and monetary policies and external shocks caused the
systems demise.
-confidence in the US dollar fell as the US ran consistent and
growing deficits in its balance of payments
-in less tan seven months, US lost nearly a third of its gold
reserves as players around the world exchanged the dollar
for gold.
-multiple devaluations in the US dollar put pressure to allow
dollar to float.
-this lack of confidence forced President Nixon to suspend
purchases or sales of gold
-exchange rates of most leading countries were allowed to
float in relation to the US dollar
,-dollar came into attack a year later and lost 10 percent of
value
-in 1973 a fixed rate system no longer seemed feasible and
the dollar along others was allowed to float.
floating era - CORRECT ANSWERS -exchange rates became
much more volatile and less predictable they were during
the fixed period
-several emerging market currency crises
-EMS restructuring and introduction of the Euro
emerging era - CORRECT ANSWERS growth in emerging
market economies and currencies
hard pegs - CORRECT ANSWERS -countries that have given
up their own sovereignty over monetary policy
-ex. dollarization or currency boards
soft pegs - CORRECT ANSWERS fixed exchange rates, with
five subcategories of classification
floating arrangments - CORRECT ANSWERS mostly market
driven, these may be free floating or floating with
ocassional govt intervention
, residual - CORRECT ANSWERS the remains of currency
arrangements that dont well fit previous categorizations
global ecletic - CORRECT ANSWERS -most developed
countries have floating currencies
-many emerging countries try to have a soft peg system but
were eventually forced to let them float.
todays global currencies - CORRECT ANSWERS -the
proportion of IMF member countries with floating regimes
has been holding at about 34%
-soft pegs continue to dominate
-although the contemporary international monetary system
is typically referred to as "floating regime", it is clearly not
the case for majority of world nations.
fixed vs flexible exchange rates - CORRECT ANSWERS -A
nations choice as to which currency regime to follow reflects
national priorities about all facets of the economy,
including: inflation, unemployment, interest rate levels,
trade balances and economic growth
-the choice between fixed and flexible rates may change
over time as priorities change.
