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Mgmt Exam Prep > 7 In Sham We Trust > Flashcards

7 In Sham We Trust Flashcards

1
Q

What is the primary characteristic that gives money its value?
A. Intrinsic metal content
B. Government enforcement
C. Collective acceptance and trust
D. Commodity backing

A

C. Collective acceptance and trust

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2
Q

Which type of money has intrinsic value based on its physical properties?
A. Token money
B. Commodity money
C. Fiat money
D. Digital currency

A

B. Commodity money

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3
Q

The Spanish silver extraction at Potosí mainly benefited:
A. Indigenous Bolivians
B. The Spanish Empire
C. Local Bolivian industries
D. Asian trade partners

A

B. The Spanish Empire

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4
Q

The Bank of England was initially established to:
A. Manage public debt
B. Fund the British Navy
C. Issue fiat currency
D. Stabilize inflation

A

B. Fund the British Navy

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5
Q

The Panic of 1907 in the U.S. led to the creation of:
A. The Federal Reserve
B. Commercial banks
C. The Gold Standard Act
D. Private banking coalitions

A

A. The Federal Reserve

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6
Q

What role does the Federal Reserve NOT fulfill?
A. Maximizing employment
B. Setting exchange rates
C. Stabilizing prices
D. Managing long-term interest rates

A

B. Setting exchange rates

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7
Q

Why did Canada abandon the gold standard in 1931?
A. To manage inflation more flexibly
B. To promote silver mining
C. To support private banking
D. To align with British policies

A

A. To manage inflation more flexibly

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8
Q

What was the primary purpose of Canada’s Deposit Insurance established in 1967?
A. Increase competition among banks
B. Protect consumer savings in case of bank failure
C. Encourage foreign investment
D. Regulate mortgage markets

A

B. Protect consumer savings in case of bank failure

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9
Q

The Maastricht Treaty laid the groundwork for:
A. The International Monetary Fund
B. The Eurozone’s common currency
C. The end of the Bretton Woods system
D. A global financial exchange system

A

B. The Eurozone’s common currency

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10
Q

Which country adopted the euro in 2023?
A. Croatia
B. Sweden
C. Denmark
D. Greece

A

A. Croatia

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11
Q

Free-floating exchange rates are determined by:
A. Central bank policies
B. Global trade agreements
C. Market supply and demand
D. Fixed currency pegs

A

C. Market supply and demand

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12
Q

Managed floating systems allow for:
A. No government intervention
B. Frequent devaluation
C. Occasional central bank adjustments
D. Fixed currency exchange rates

A

C. Occasional central bank adjustments

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13
Q

The Bretton Woods system primarily tied global currencies to:
A. Gold and silver reserves
B. The U.S. dollar
C. The Euro
D. International trade balances

A

B. The U.S. dollar

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14
Q

What key financial instrument did the European Monetary System use before the euro?
A. European Currency Unit (ECU)
B. Special Drawing Rights (SDRs)
C. European Monetary Bonds
D. Virtual Gold Standards

A

A. European Currency Unit (ECU)

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15
Q

Which exchange rate system allows currencies to move within set bands?
A. Fully fixed
B. Free-floating
C. Managed floating
D. Semi-fixed

A

D. Semi-fixed

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16
Q

Why did Germany initially resist adopting the euro?
A. Economic concerns over inflation
B. Political opposition to the EU
C. Lack of monetary independence
D. Trade imbalances with other EU nations

A

A. Economic concerns over inflation

17
Q

The Big Mac Index is used to measure:
A. The impact of inflation on fast food prices
B. Purchasing Power Parity (PPP)
C. Global economic growth
D. Currency exchange reserves

A

B. Purchasing Power Parity (PPP)

18
Q

What major limitation affects the Big Mac Index?
A. It only measures luxury goods
B. It does not account for wage differences
C. It is based on fixed exchange rates
D. It ignores commodity markets

A

B. It does not account for wage differences

19
Q

Why is a GDP-adjusted Big Mac Index more accurate?
A. It uses current inflation rates
B. It factors in local income levels
C. It tracks international debt levels
D. It adjusts for Big Mac ingredient sourcing

A

B. It factors in local income levels

20
Q

Which U.S. monetary policy action significantly strengthens the dollar?
A. Federal tax reforms
B. Federal Reserve interest rate hikes
C. Government subsidies
D. Public investment bonds

A

B. Federal Reserve interest rate hikes

21
Q

The U.S. dollar’s dominance is reinforced by:
A. High commodity exports
B. Central bank regulations
C. Global financial market liquidity
D. Extensive use of gold reserves

A

C. Global financial market liquidity

22
Q

The Eurobond issuance under NGEU is aimed at:
A. Supporting small EU economies
B. Replacing U.S. Treasury bonds
C. Creating a new European fiscal system
D. Competing with the dollar as a safe asset

A

D. Competing with the dollar as a safe asset

23
Q

Which crisis shifted global financial trust back to the U.S. dollar?
A. The Great Depression
B. The 2007 Financial Crisis
C. The 1997 Asian Financial Crisis
D. The European Debt Crisis

A

B. The 2007 Financial Crisis

24
Q

What concept allows borrowing costs to stabilize across EU nations?
A. Virtual currencies
B. Eurozone convergence criteria
C. Fixed rate adjustments
D. Centralized fiscal policies

A

B. Eurozone convergence criteria

25
Q

Why do countries like Hong Kong maintain a currency peg?
A. To ensure capital market independence
B. To align with U.S. monetary policies
C. To stabilize their currency value
D. To attract international speculators

A

C. To stabilize their currency value

26
Q

A fixed exchange rate system adjusts its peg through:
A. Market fluctuations
B. Central bank interventions
C. International trade volume
D. Global economic conditions

A

B. Central bank interventions

27
Q

How does a currency board system differ from a fully fixed rate?
A. It prohibits foreign exchange reserves
B. It allows limited currency fluctuations
C. It requires full foreign reserve backing
D. It prioritizes domestic economic policy

A

C. It requires full foreign reserve backing

28
Q

The Delors Report proposed what stages for European Monetary Union?
A. Economic coordination, monetary stability, common currency
B. Single fiscal policy, debt management, euro adoption
C. Trade liberalization, fixed exchange rates, fiscal independence
D. Digital currency adoption, monetary easing, inflation control

A

A. Economic coordination, monetary stability, common currency

29
Q

What is the primary benefit of a semi-fixed exchange rate system?
A. Full flexibility with inflation controls
B. Pegged currency stability
C. Controlled currency fluctuations
D. Reduced need for foreign reserves

A

C. Controlled currency fluctuations

29
Q

How does the Federal Reserve influence global trade through monetary policy?
A. By printing additional dollars for export
B. By setting global commodity prices
C. By affecting the cost of dollar-denominated debts
D. By regulating international trade tariffs

A

C. By affecting the cost of dollar-denominated debts

Mgmt Exam Prep (9 decks)

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