Chapter 9 - Article #2 Flashcards
What event highlighted the geopolitical power of the dollar in 2022?
A. China’s economic growth.
B. Sanctions on Russia’s Central Bank after the Ukraine invasion.
C. Introduction of digital currencies by central banks.
D. Global adoption of the yuan for trade.
B. Sanctions on Russia’s Central Bank after the Ukraine invasion.
Why is the dollar so widely used in international trade?
A. It is backed solely by U.S. military power.
B. It offers abundant and cheap liquidity and universal acceptance.
C. Other currencies have higher volatility.
D. It is mandated by the IMF.
B. It offers abundant and cheap liquidity and universal acceptance.
What percentage of global currency trades involve the dollar?
A. About 50%.
B. Around 90%.
C. Less than 60%.
D. Close to 30%.
B. Around 90%.
How did the sanctions on Russia expose vulnerabilities in the global monetary system?
A. It forced Russia to use the euro exclusively.
B. It demonstrated over-reliance on the dollar for reserves and trade.
C. It reduced oil and gas exports globally.
D. It caused China to halt yuan-denominated trade.
B. It demonstrated over-reliance on the dollar for reserves and trade.
What limits the success of alternatives like the yuan as a global reserve currency?
A. China’s economic contraction and lack of convertibility.
B. Overdependence on foreign markets for trade.
C. Lack of interest from emerging markets.
D. High transaction costs compared to the dollar.
A. China’s economic contraction and lack of convertibility.
What is a significant consequence of the dollar’s rise due to Federal Reserve rate hikes?
A. A decrease in U.S. inflation rates.
B. Increased debt servicing costs for countries with dollar-denominated debt.
C. Reduced borrowing costs for emerging markets.
D. Strengthening of local currencies globally.
B. Increased debt servicing costs for countries with dollar-denominated debt.
Why is borrowing in local currency a safer strategy for emerging markets?
A. It avoids dependence on the dollar for imports.
B. It shifts currency risk to foreign lenders.
C. It eliminates the need for trade with the U.S.
D. It secures fixed interest rates.
B. It shifts currency risk to foreign lenders.
What has helped the global financial system manage dollar dependence since the 1990s?
A. Adoption of a multi-currency reserve system.
B. Development of tools to moderate dollar reliance, like borrowing in local currencies.
C. Establishment of an alternative reserve currency by the IMF.
D. Shift to cryptocurrency for global trade.
B. Development of tools to moderate dollar reliance, like borrowing in local currencies.
What role do U.S. monetary policies play in global economic conditions?
A. They primarily benefit developing economies.
B. They create synchronized tightening of monetary policies globally.
C. They have little influence outside North America.
D. They reduce dollar dominance over time.
B. They create synchronized tightening of monetary policies globally.
