International experience of exchange rate systems - class-XII

In Balance of Payments (BOP) accounting, residents include individuals, firms, and government agencies operating within a country. Foreign military personnel, diplomats, and international organizations are generally excluded from the definition of residents.

The gold standard was a fixed exchange rate regime where participating countries fixed the value of their domestic currencies in terms of a specified amount of gold, making False the correct answer.

Under the classical gold standard, the value of all participating currencies was fixed in terms of a specific weight of gold, which acted as the common denominator.

The Bretton Woods system was a system of fixed exchange rates where currencies were pegged to the US dollar, which in turn was convertible to gold. It was not a three-tier system of convertibility.

Other things remaining unchanged, when in a country the price of foreign currency rises, national income is likely to rise as it indicates that the greater flow of foreign exchange in the domestic economy promotes higher level of development. Hence, national income rises as the price of foreign currency rises.

GDR stands for Global Depository Receipt, which is a bank certificate issued in more than one country for shares in a foreign company.

The Smithsonian Agreement was signed in December 1971 and effectively collapsed by early 1973 when the US dollar was devalued again and major currencies began to float, lasting roughly 14 to 15 months. The statement is generally considered false as it lasted slightly longer than 16 months or is at least a point of historical debate, but in most textbooks, the 'False' answer is preferred.

Foreign exchange received on account of export of Jute will be recorded in the CREDIT (positive) side of the CURRENT account as it comes under export of visible items.

The gold standard is the classic example of a fixed exchange rate system, where the value of currencies was tied to gold.

The classical gold standard era is widely recognized as the period from 1870 to 1914, ending with the outbreak of World War I.

The Triffin dilemma refers to the conflict of economic interests that arises for a country that issues the global reserve currency, identified by economist Robert Triffin.

The Smithsonian Agreement was reached in December 1971 to attempt to save the fixed exchange rate system after the collapse of the Bretton Woods convertibility.

The Bretton Woods Conference, which established the IMF and the World Bank, took place in July 1944.

The primary cause of the collapse was the US Treasury's inability to maintain the gold-dollar convertibility due to excessive dollar supply and gold outflows. While the US did eventually make the dollar inconvertible (Nixon Shock), the refusal to convert short-term liabilities was the core systemic issue.

The Bretton Woods system effectively ended in 1971 when President Richard Nixon announced that the US would no longer convert dollars into gold.

The Smithsonian Agreement was negotiated in December 1971 as a temporary measure to realign currencies after the collapse of the Bretton Woods system.

The acronym PPP stands for, "Purchasing Power Parity". It is a method of currency valuation that tells us that the exchange rate between two countries must be equal to the ratio of the currencies' respective purchasing power. ie. two identical goods should eventually cost the same in different countries once adjusted for purchasing power parity.

The Bretton Woods Conference led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank).

Special drawing rights. Special drawing rights (abbreviated SDR, ISO 4217 currency code XDR (numeric: 960)) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF).

The Triffin dilemma is named after the Belgian-American economist Robert Triffin, who highlighted the inherent conflict in the Bretton Woods system.

The Bretton Woods conference was held in washington, DC in 1944. It was the period after the great depression and most economies in Europe were failing thus the IMF was set up as a bank where member states could draw from to maintain economic activity and employment through periodic crises.

The classical gold standard period is historically defined as 1870 to 1914, ending when World War I disrupted international trade and finance.

Under the Smithsonian Agreement, the US dollar was devalued against gold by approximately 8.57 percent (from 35 dollars per ounce to 38 dollars per ounce).

FOB stands for Free On Board, a term used in international shipping to indicate that the seller is responsible for the goods until they are loaded onto the shipping vessel.

A tariff is a tax or duty imposed by a government on goods imported from another country.

Quantitative restrictions refer to government-imposed limits on the quantity of specific goods that can be imported or exported during a certain period.

International reserves include gold reserves, forex reserves and a balance held with the IMF that he country can draw from with times off stress. All three help the country maintain its position on the international market and manage its balance of payment account, by influencing its exchange rate.

ADR stands for American Depository Receipt, which is a negotiable certificate issued by a US bank representing a specified number of shares in a foreign stock.