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Chapter 10: The International Monetary System Multiple Choice Questions 1. The sole purpose of the international monetary system is to a) maximize the profits of MNCs. b) protect the rights of home countries of MNCs. c) protect the rights of host countries of MNCs. d) control and regulate the currencies of countries. e) facilitate international economic exchange. Answer: e 2. An exchange-rate system is a set of rules governing how much currencies in the foreign exchange market can a) rise or fall in value. b) be traded for imports. c) be traded for exports. d) be used to make debt payments. e) be regulated by the IMF. Answer: a 3. The most important feature of a fixed exchange-rate system is that a) markets establish the values for currencies. b) central banks establish the values for their currencies. c) governments establish the values for gold and silver. d) governments establish the fixed values for their currencies. e) governments buy and sell their currencies. Answer: d 4. The most important feature of a floating exchange-rate system is that a) markets establish the values for currencies. b) central banks establish the values for their currencies. c) governments establish the values for gold and silver. d) governments establish the fixed values for their currencies. e) governments buy and sell their currencies. Answer: a 5. In a managed float exchange-rate system a) governments commit themselves to maintaining a specific fixed price against other currencies b) governments allow their currencies to float freely. c) governments intervene in the foreign exchange market to influence the value of their currency. d) currency speculation is prohibited. e) governments only change the value of their currency very rarely.
