Which exchange rate mechanism in intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions ?

Related Mcqs:

1. Which exchange rate system involves a leaning against the wind|| strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run ?

   A. pegged of fixed exchange rates
   B. adjustable pegged exchange rates
   C. managed floating exchange rates
   D. free floating exchange rates

2. Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium economic theory suggests that the nation’s balance of payments would move into a surplus position if there occurred in the nation a (an) ?

   A. increase in the money demand
   B. decrease in the money demand
   C. increase in the money demand
   D. None of the above

3. Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

   A. decrease in the money supply
   B. increase in the money supply
   C. decrease in the money demand
   D. None of the above

4. Which exchange rate mechanism calls for frequent redefining of the par value by small amounts to remove a payments disequilibrium ?

   A. dual exchange rate
   B. adjustable pegged exchange rates
   C. managed floating exchange rates
   D. crawling pegged exchange rates

5. Which fixed exchange rates and no private capital flows, to correct a balance of payments deficit, the central bank will _______ and ________ ?

   A. buy foreign exchange, sell domestic currency
   B. sell foreign exchange buy domestic currency
   C. buy foreign exchange buy domestic currency
   D. sell foreign exchange sell domestic currency

6. Under a pegged exchange rate system which does not explain why a country would have a balance of payments deficit ?

   A. very high rates of inflation occur domestically
   B. foreigners discriminate against domestic products
   C. technological advance is superior abroad
   D. the domestic currency is undervalued relative to other currencies

7. Exchange rate of which of the following currencies falls because of persistent balance of payments deficit ?

   A. Gold currency
   B. Hard currency
   C. Silver currency
   D. Soft currency

8. If there is a balance of payments deficit then in a floating exchange rate system ?

   A. The external value of the currency would tend to fall
   B. The external value of the currency would tend to rise
   C. The injections from trade are greater then the withdrawals
   D. Aggregate demand is increasing

9. The difference between a country’s balance of payments and its balance of international indebtedness?

   A. is equal to official reserve transactions
   B. occurs because of foreign exchange fluctuations
   C. reflects statistical discrepancies
   D. reflects the difference between flow and stock concepts

10. If Canada runs a balance of payments surplus and exchange rates are floating ?

    A. the value of other currencies will rise relative to the dollar
    B. the dollar will depreciate relative to other currencies
    C. the price of foreign goods will become cheaper to Canadians
    D. the price of foreign goods will rise for Canadians