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208 GWES
MCQ
International economic regulation operates on
two levels. Which are they?
(a) Political and economic
(b) Unipolar and multipolar
(c) Regional and global
(d) Financial and political
Answer:(c) Regional and global
Under a gold standard -
a)a nation’s currency can be traded for gold
at a fixed rate
b)a nation’s central bank or monetary
authority has absolute control over its
money supply
c) new discoveries of gold have no effect on
money supply or prices
d) a & b
Answer:a)a nation’s currency can be traded
for gold at a fixed rate
• Under the Bretton woods system, the us
dollar was pegged to gold at-
• a)30 $ per ounce
• b) 35$ per ounce
• c) 25$ per ounce
• d) 45 $ per ounce
Answer:b) 35$ per ounce
US abandoned the Gold Standard in the year
1. 1931
2. 1933
3.1945
4.1929
Answer:2. 1933
. Bretton Woods Conference was held in
1. June 1947
2.July 1945
3.July 1944
4.December 1945
Answer:3.July 1944
Which currency was given the status of
universal reserve asset in addition to gold
under the Bretton Woods system?
1.Indian Rupee
2.US Dollar
3.UK Sterling Pound
4.Euros
Answer:2.US Dollar
Under the Bretton Woods system, Currency
rates were allowed to move both sides of
parity rates up to
1.+/-1%
2.+/-5%
3.+/-7%
4.+/-10%
Answer:1.+/-1%
European Monetary Exchange Rate regime
was set up in
1.1988
2.1979
3.1999
4.1951
Answer:2.1979
Under ____________________ system,
stability is ensured through intervention by
the Central Bank.
1.Fixed Exchange Rate
2.Fluctuating Exchange Rate
3.Pure Gold Standard
4.Bimetallism
Answer:1.Fixed Exchange Rate
• Development of International Finance is
important due to
• 1.Economic growth of all participating
countries.
• 2.Economic factors help in making
international investment decisions.
• 3.Promotion of domestic investment and
trade.
• 4.All of the above
Answer:4.All of the above
The world’s major trading currencies which
are all free to float against each other,
include all of the following except
1.British Pound
2.Japanese Yen
3.US Dollar
4.Spanish peso
Answer: 4.Spanish peso
The exchange rate between currencies was fixed but
adjustable, meaning:
a. countries could readjust the peg to reflect internal
fiscal conditions
b. international exchange rates were reassessed
every few months
c. the exchange rate peg was adjusted by k% per
fiscal quarter
d. countries could not ever devalue their currencies
Answer:a. countries could readjust the peg to
reflect internal fiscal conditions
One reason the global peg to the US dollar failed
was because:
a. countries refused to peg their currency to the
dollar
b. the US only considered its own interests when
conducting monetary policy
c. other countries were allowed to print US dollars
d. the US tried to maintain a fixed amount of dollars
in circulation
Answer:b. the US only considered its own
interests when conducting monetary policy
The closure of the gold window meant that US
dollars:
a. lost half their value overnight
b. were overvalued relative to their worth
c. were no longer convertible to gold at a
fixed rate
d. were no longer accepted by the
international community in exchanges
Answer: c. were no longer convertible to gold
at a fixed rate
After the breakdown of the Bretton Woods
system, currencies existed in a system of:
a. floating exchange rates
b. extreme volatility
c. fixed exchange rates
d. significant distrust in exchange
Answer: a. floating exchange rates
What was the desire behind the Bretton Woods
Agreement?
(a) A desire to put an end to the Second World
War
(b) A desire to eradicate the causes that led to the
Second World War
(c) A desire for creating a system of fluctuating
currencies
(d) A desire for the abolition of different currencies
Answer: (b) A desire to eradicate the causes
that led to the Second World War
What was the ultimate goal of the Bretton Woods
Agreement?
(a) The creation of a global alliance of States
(b) The creation of an economic trade block
(c) The creation of a new world economic order
(d) The creation of a military alliance
Answer: (c) The creation of a new world
economic order
• International Economic Law is primarily concerned
with certain institutions of global remit. These are:
• (a) The ASEAN, the EU and NAFTA
• (b) The WTO, the IMF and the World Bank Group
• (c) The UN and the International Court of Justice
• (d) The NATO and the International Criminal Court
Answer: (b) The WTO, the IMF and the
World Bank Group
Which of the following statement is not true about the
International Monetary Fund?
(a) IMF was established along with the word bank
(b) IMF is the result of the Bretton Woods conference
(c) Christine Lagarde is the current Chief Executive Officer of
the IMF
(d) Currently 193 countries are the members of the IMF
Answer:(d) Currently 193 countries are the members of the IMF
The International Monetary Fund (IMF) was created in 1945.The
International Monetary Fund (IMF) is an organization of 189 countries,
working to foster global monetary cooperation, secure financial
stability, facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the world.
When was IMF established?
(a) Dec. 27,1945
(b) Jan. 30, 1947
(c) Jan.1, 1946
(d) Sept. 24, 1947
Answer:(a) Dec. 27,1945
The IMF was conceived at a UN conference
in Bretton Woods, New Hampshire, United
States, in July 1944. Its formation take
place on Dec. 27, 1945.
Which of the following statement is NOT correct
regarding the membership of the IMF?
(a) Currently its membership is 189
(b) All "member countries" of the IMF are members
of the United Nations
(c) All member countries of the IMF are not
sovereign states
(d) Nauru is the latest member of the IMF
Answer:(b) All "member countries" of the IMF are members
of the United Nations
All member countries of the IMF are not sovereign states
therefore all "member countries" of the IMF are not
members of the United Nations.
The value of Special Drawing Right (SDR)
is determined by the basket of
......currencies.
(a) 4
(b) 5
(c) 6
(d) 7
Answer:(b) 5
The value of Special Drawing Right (SDR) is determined by
the basket of 5 currencies. The currencies are, US Dollar,
Japanese Yen, British Pound, Chinese Yuan and Euro.
Which of the following currency has largest
weightage in the determination of the value of
the SDR?
(a) Japanese Yen
(b) Euro
(c) US Dollar
(d) British Pound
Answer: (c) US Dollar
The IMF decided that the Renminbi (Chinese yuan) would be added to
the SDR basket since October 1, 2016. Since then SDR basket
consists of the following five currencies: U.S. dollar 41.73%, Euro
30.93%, Renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%,
British pound 8.09%.
Which of the following is not the objective of the
IMF?
(a) To promote international monetary cooperation
(b) To ensure balanced international trade
(c) To ensure exchange rate stability
(d) To provide loan to private sectors
Answer: (d) To provide loan to private sectors
Allotment of the loan to the private sector is not
covered under the objectives of the IMF.
International Finance Corporation is responsible
to provide loan to private sectors.
Which of the following statement is NOT correct
about the quota at the IMF?
(a) Voting power in the IMF is based on a quota
system
(b) USA has highest quota in the IMF
(c) Germany has third highest quota in the IMF
(d) Indian quota in the IMF stands at 2.79% of the
total quota
Answer:(c) Germany has third highest quota in the IMF
China has third highest quota in the IMF. At present Chinese
share in the IMF quota is 6.49%. Germany is at the fourth
position having quota of 5.67%.
If the Balance of Payment of a country is
adverse, then which institution will help
that country?
(a) World Bank
(b) World Trade Organization
(c) International Monetary Fund
(d) Asian Development Bank
Answer:(c) International Monetary Fund
The International Monetary Fund helps in correcting the
Balance of Payment of the member countries. Its another
goal is to ensure exchange rate stability.
Which of the following currency is not included
in the calculation of SDR value?
(a) Yen
(b) Yuan
(c) Rupee
(d) Pound sterling
Answer: (c) Rupee
In determining the IMF basket, rupee's value is not
included. Since October 1, 2016 SDR basket
consists of the following five currencies: U.S.
dollar, Euro, Renminbi (Chinese Yuan), Japanese
Yen and British Pound.
Which of the following is known as the
Paper Gold?
(a) US Dollar
(b) Pound
(c) Demand draft
(d) Special Drawing Right
Answer:(d) Special Drawing Right
Special Drawing Right is known as the Paper Gold. The
value of the SDR is based on a basket of key
international currencies reviewed by IMF every five
years. SDR was introduced in the 1969 by the IMF to
solve the problem of International liquidity.
under fixed exchange rate system , the currency rate
in the market is maintained through -
a)Rationing of foreign exchange
b)Official intervention
c)Centralising all foreign exchange operations
d)None of the above
Answer:b)Official intervention
India s foreign exchange rate system is?
A. Fixed target
B. Managed float
C. Free float
D. Fixed and Float
Answer:B. Managed float
What is Devaluation of currency?
i) When the value of domestic currency decreases in relation to the value
of foreign currency (flexible system)
ii) Fall in the value of domestic currency in relation to foreign currency as
planned by the Central Bank (Fixed system)
a) Only i
b) Only ii
c) Both i and ii
d) None of the above
Answer: B) Only ii
Devaluation is the fall in the value of domestic currency
compared to foreign currency as planned by the Central
Bank when exchange rate is not determined by forces of
demand and supply under a fixed exchange rate system.
What is the nominal exchange rate?
a) Number of units of domestic currency, one must
give up to get an unit of foreign currency
b) Price of foreign currency in terms of domestic
currency
c) Ratio of foreign to domestic prices, measured in
the same currency
d) Both a and b
Answer: d) Both a and b
Nominal exchange rate is the total number of units of
domestic currency, anyone must give up to get one unit
of foreign currency. Simply it refers to the price of foreign
currency in terms of domestic currency.
What are the benefits of following the fixed
exchange rate system?
a) Minimal exchange rate fluctuations
b) Reduction in volatility and fluctuations in
prices
c) Imposition of discipline on the monetary
authority
d) All of the above
Answer: D) All of the above
What is true about the exchange rate system of FOREX
i) It is either fixed against gold or some currency in fixed system
ii) In clean floating system, central authority checks fluctuations
created by market forces on exchange rate
1. Only i
2. Only ii
3. Both i and ii
4. None of the above
Answer: 1. Only i
In the Fixed system the government maintains their exchange rate fixed
either against gold or some other currency. Under the Clean floating
system, exchange rate is freely determined by the market forces of
demand and supply of foreign exchange with no interference by the
central authority.
What acts as the first defense for India
against the economic slowdown?
a) Foreign Exchange Reserves
b) Securities
c) Gold
d) Domestic Currency
Answer: Foreign Exchange Reserves
It is advisable to keep foreign reserves in
international currency so that the market shocks
could be avoided and absorbed.
Answer:

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208 - Geopolitics & World Economic Systems MCQ 23

  • 2. International economic regulation operates on two levels. Which are they? (a) Political and economic (b) Unipolar and multipolar (c) Regional and global (d) Financial and political Answer:(c) Regional and global
  • 3. Under a gold standard - a)a nation’s currency can be traded for gold at a fixed rate b)a nation’s central bank or monetary authority has absolute control over its money supply c) new discoveries of gold have no effect on money supply or prices d) a & b Answer:a)a nation’s currency can be traded for gold at a fixed rate
  • 4. • Under the Bretton woods system, the us dollar was pegged to gold at- • a)30 $ per ounce • b) 35$ per ounce • c) 25$ per ounce • d) 45 $ per ounce Answer:b) 35$ per ounce
  • 5. US abandoned the Gold Standard in the year 1. 1931 2. 1933 3.1945 4.1929 Answer:2. 1933
  • 6. . Bretton Woods Conference was held in 1. June 1947 2.July 1945 3.July 1944 4.December 1945 Answer:3.July 1944
  • 7. Which currency was given the status of universal reserve asset in addition to gold under the Bretton Woods system? 1.Indian Rupee 2.US Dollar 3.UK Sterling Pound 4.Euros Answer:2.US Dollar
  • 8. Under the Bretton Woods system, Currency rates were allowed to move both sides of parity rates up to 1.+/-1% 2.+/-5% 3.+/-7% 4.+/-10% Answer:1.+/-1%
  • 9. European Monetary Exchange Rate regime was set up in 1.1988 2.1979 3.1999 4.1951 Answer:2.1979
  • 10. Under ____________________ system, stability is ensured through intervention by the Central Bank. 1.Fixed Exchange Rate 2.Fluctuating Exchange Rate 3.Pure Gold Standard 4.Bimetallism Answer:1.Fixed Exchange Rate
  • 11. • Development of International Finance is important due to • 1.Economic growth of all participating countries. • 2.Economic factors help in making international investment decisions. • 3.Promotion of domestic investment and trade. • 4.All of the above Answer:4.All of the above
  • 12. The world’s major trading currencies which are all free to float against each other, include all of the following except 1.British Pound 2.Japanese Yen 3.US Dollar 4.Spanish peso Answer: 4.Spanish peso
  • 13. The exchange rate between currencies was fixed but adjustable, meaning: a. countries could readjust the peg to reflect internal fiscal conditions b. international exchange rates were reassessed every few months c. the exchange rate peg was adjusted by k% per fiscal quarter d. countries could not ever devalue their currencies Answer:a. countries could readjust the peg to reflect internal fiscal conditions
  • 14. One reason the global peg to the US dollar failed was because: a. countries refused to peg their currency to the dollar b. the US only considered its own interests when conducting monetary policy c. other countries were allowed to print US dollars d. the US tried to maintain a fixed amount of dollars in circulation Answer:b. the US only considered its own interests when conducting monetary policy
  • 15. The closure of the gold window meant that US dollars: a. lost half their value overnight b. were overvalued relative to their worth c. were no longer convertible to gold at a fixed rate d. were no longer accepted by the international community in exchanges Answer: c. were no longer convertible to gold at a fixed rate
  • 16. After the breakdown of the Bretton Woods system, currencies existed in a system of: a. floating exchange rates b. extreme volatility c. fixed exchange rates d. significant distrust in exchange Answer: a. floating exchange rates
  • 17. What was the desire behind the Bretton Woods Agreement? (a) A desire to put an end to the Second World War (b) A desire to eradicate the causes that led to the Second World War (c) A desire for creating a system of fluctuating currencies (d) A desire for the abolition of different currencies Answer: (b) A desire to eradicate the causes that led to the Second World War
  • 18. What was the ultimate goal of the Bretton Woods Agreement? (a) The creation of a global alliance of States (b) The creation of an economic trade block (c) The creation of a new world economic order (d) The creation of a military alliance Answer: (c) The creation of a new world economic order
  • 19. • International Economic Law is primarily concerned with certain institutions of global remit. These are: • (a) The ASEAN, the EU and NAFTA • (b) The WTO, the IMF and the World Bank Group • (c) The UN and the International Court of Justice • (d) The NATO and the International Criminal Court Answer: (b) The WTO, the IMF and the World Bank Group
  • 20. Which of the following statement is not true about the International Monetary Fund? (a) IMF was established along with the word bank (b) IMF is the result of the Bretton Woods conference (c) Christine Lagarde is the current Chief Executive Officer of the IMF (d) Currently 193 countries are the members of the IMF Answer:(d) Currently 193 countries are the members of the IMF The International Monetary Fund (IMF) was created in 1945.The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
  • 21. When was IMF established? (a) Dec. 27,1945 (b) Jan. 30, 1947 (c) Jan.1, 1946 (d) Sept. 24, 1947 Answer:(a) Dec. 27,1945 The IMF was conceived at a UN conference in Bretton Woods, New Hampshire, United States, in July 1944. Its formation take place on Dec. 27, 1945.
  • 22. Which of the following statement is NOT correct regarding the membership of the IMF? (a) Currently its membership is 189 (b) All "member countries" of the IMF are members of the United Nations (c) All member countries of the IMF are not sovereign states (d) Nauru is the latest member of the IMF Answer:(b) All "member countries" of the IMF are members of the United Nations All member countries of the IMF are not sovereign states therefore all "member countries" of the IMF are not members of the United Nations.
  • 23. The value of Special Drawing Right (SDR) is determined by the basket of ......currencies. (a) 4 (b) 5 (c) 6 (d) 7 Answer:(b) 5 The value of Special Drawing Right (SDR) is determined by the basket of 5 currencies. The currencies are, US Dollar, Japanese Yen, British Pound, Chinese Yuan and Euro.
  • 24. Which of the following currency has largest weightage in the determination of the value of the SDR? (a) Japanese Yen (b) Euro (c) US Dollar (d) British Pound Answer: (c) US Dollar The IMF decided that the Renminbi (Chinese yuan) would be added to the SDR basket since October 1, 2016. Since then SDR basket consists of the following five currencies: U.S. dollar 41.73%, Euro 30.93%, Renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%, British pound 8.09%.
  • 25. Which of the following is not the objective of the IMF? (a) To promote international monetary cooperation (b) To ensure balanced international trade (c) To ensure exchange rate stability (d) To provide loan to private sectors Answer: (d) To provide loan to private sectors Allotment of the loan to the private sector is not covered under the objectives of the IMF. International Finance Corporation is responsible to provide loan to private sectors.
  • 26. Which of the following statement is NOT correct about the quota at the IMF? (a) Voting power in the IMF is based on a quota system (b) USA has highest quota in the IMF (c) Germany has third highest quota in the IMF (d) Indian quota in the IMF stands at 2.79% of the total quota Answer:(c) Germany has third highest quota in the IMF China has third highest quota in the IMF. At present Chinese share in the IMF quota is 6.49%. Germany is at the fourth position having quota of 5.67%.
  • 27. If the Balance of Payment of a country is adverse, then which institution will help that country? (a) World Bank (b) World Trade Organization (c) International Monetary Fund (d) Asian Development Bank Answer:(c) International Monetary Fund The International Monetary Fund helps in correcting the Balance of Payment of the member countries. Its another goal is to ensure exchange rate stability.
  • 28. Which of the following currency is not included in the calculation of SDR value? (a) Yen (b) Yuan (c) Rupee (d) Pound sterling Answer: (c) Rupee In determining the IMF basket, rupee's value is not included. Since October 1, 2016 SDR basket consists of the following five currencies: U.S. dollar, Euro, Renminbi (Chinese Yuan), Japanese Yen and British Pound.
  • 29. Which of the following is known as the Paper Gold? (a) US Dollar (b) Pound (c) Demand draft (d) Special Drawing Right Answer:(d) Special Drawing Right Special Drawing Right is known as the Paper Gold. The value of the SDR is based on a basket of key international currencies reviewed by IMF every five years. SDR was introduced in the 1969 by the IMF to solve the problem of International liquidity.
  • 30. under fixed exchange rate system , the currency rate in the market is maintained through - a)Rationing of foreign exchange b)Official intervention c)Centralising all foreign exchange operations d)None of the above Answer:b)Official intervention
  • 31. India s foreign exchange rate system is? A. Fixed target B. Managed float C. Free float D. Fixed and Float Answer:B. Managed float
  • 32. What is Devaluation of currency? i) When the value of domestic currency decreases in relation to the value of foreign currency (flexible system) ii) Fall in the value of domestic currency in relation to foreign currency as planned by the Central Bank (Fixed system) a) Only i b) Only ii c) Both i and ii d) None of the above Answer: B) Only ii Devaluation is the fall in the value of domestic currency compared to foreign currency as planned by the Central Bank when exchange rate is not determined by forces of demand and supply under a fixed exchange rate system.
  • 33. What is the nominal exchange rate? a) Number of units of domestic currency, one must give up to get an unit of foreign currency b) Price of foreign currency in terms of domestic currency c) Ratio of foreign to domestic prices, measured in the same currency d) Both a and b Answer: d) Both a and b Nominal exchange rate is the total number of units of domestic currency, anyone must give up to get one unit of foreign currency. Simply it refers to the price of foreign currency in terms of domestic currency.
  • 34. What are the benefits of following the fixed exchange rate system? a) Minimal exchange rate fluctuations b) Reduction in volatility and fluctuations in prices c) Imposition of discipline on the monetary authority d) All of the above Answer: D) All of the above
  • 35. What is true about the exchange rate system of FOREX i) It is either fixed against gold or some currency in fixed system ii) In clean floating system, central authority checks fluctuations created by market forces on exchange rate 1. Only i 2. Only ii 3. Both i and ii 4. None of the above Answer: 1. Only i In the Fixed system the government maintains their exchange rate fixed either against gold or some other currency. Under the Clean floating system, exchange rate is freely determined by the market forces of demand and supply of foreign exchange with no interference by the central authority.
  • 36. What acts as the first defense for India against the economic slowdown? a) Foreign Exchange Reserves b) Securities c) Gold d) Domestic Currency Answer: Foreign Exchange Reserves It is advisable to keep foreign reserves in international currency so that the market shocks could be avoided and absorbed.