Tag: international experience of exchange rate systems

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Multiple choice international experience of exchange rate systems open economy macroeconomics international economics economics

The problem with the Bretton Woods exchange rate system was identified by Robert Triffin and was termed as _____________.

  1. Triffin dilemma

  2. Triffin paradox

  3. Triffin rigidity

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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.

Multiple choice international experience of exchange rate systems open economy macroeconomics international economics economics

_____________ established an exchange rate system in 1971.

  1. Bretton woods conference

  2. Smithsonian agreement

  3. Triffin paradox

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

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.

Multiple choice international experience of exchange rate systems open economy macroeconomics international economics economics

Which of the following is/are the reasons for the collapse of Bretton Woods system?
$1$. The refusal by the US Treasury to convert short-term liability into gold.
$2$. The US move to make dollar inconvertible.
$3$. The devaluation of US dollar in 1973.
Select the correct answer using the code given.

  1. $1$ only
  2. $1$ and $2$
  3. $2$ and $3$
  4. $1, 2$ and $3$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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.

Multiple choice international experience of exchange rate systems open economy macroeconomics international economics economics

The National Stock Exchange recently launched Interest Rate Futures (IRF). IRF in fact is a ______________.

  1. new mode of trading specifically for SME sector

  2. financial mode of trading

  3. electronic mode of transferring money from one account to another

  4. safest and fastest mode of trading at all the stock exchanges of India simultaneously
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The National Stock Exchange recently launched Interest Rate Futures (IRF).

IRF in fact is a financial mode of trading as investors can buy and sell interest rate futures contracts from different locations in the country through registered NSE brokers in the same manner as they buy and sell equities and derivatives today. The financial settlement of all the trades is guaranteed by National Securities and Clearing Corporations Ltd (NSCCL).

Multiple choice international experience of exchange rate systems open economy macroeconomics international economics economics

Many times we read about 'PPP' in economic literature. What is PPP?

  1. Tells us the exchange rates between currencies are in equilibrium when their purchasing power is the same in both the countries

  2. It tells us the exchange rates between currencies are in equilibrium when they are adjusted for differences in purchasing power.
  3. PPP means the current exchange rate of a currency against US$

  4. A measure of income inequality in developing countries
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

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.