Chapter002 International Financial Management Cheol S.

Chapter 02

International Monetary System

Multiple Choice Questions

1. The international monetary system can be defined as the institutional framework within which 

A. international payments are made.

B. movement of capital is accommodated.

C. exchange rates among currencies are determined.

D. all of the above

2. Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms to 

A. carefully manage their exchange risk exposure.

B. carefully measure their exchange risk exposure.

C. both a) and b)

3. The international monetary system went through several distinct stages of evolution. These stages are summarized, in alphabetic order, as follows:

(i)- Bimetallism

(ii)- Bretton Woods system

(iii)- Classical gold standard

(iv)- Flexible exchange rate regime

(v)- Interwar period

The chronological order that they actually occurred is: 

A. (iii), (i), (iv), (ii), and (v)

B. (i), (iii), (v), (ii), and (iv)

C. (vi), (i), (iii), (ii), and (v)

D. (v), (ii), (i), (iii), and (iv)

4. In the United States, bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873, 

A. when Congress dropped the silver dollar from the list of coins to be minted.

B. when Congress dropped the twenty-dollar gold piece from the list of coins to be minted.

C. when gold from the California gold rush drove silver out of circulation.

D. when gold from the California gold rush drove gold out of circulation.

5. The monetary system of bimetallism is unstable. Due to the fluctuation of the commercial value of the metals, 

A. the metal with a commercial value lower than the currency value tends to be used as metal and is withdrawn from circulation as money (Gresham's Law).

B. the metal with a commercial value higher than the currency value tends to be used as money...