Quiz 1 Flashcards
A well-known term in
today’s world and it is also known as international finance. It
means financial management in an international business environment. It is different because of the different currencies of different countries, dissimilar political situations, imperfect markets, and diversified opportunity sets
International Financial Management
the institutional framework within which
international payments are made, movements of capital are
accommodated, and exchange rates among currencies are
determined.
• It is a complex whole of agreements, rules, institutions, mechanisms, and policies regarding exchange rates, international payments, and the flow of capital.
International Monetary System
Before the 1870s, many countries had
bimetallism, that is, a double standard in that
free coinage was maintained for both what?
Gold and silver
What year is Bimetallism?
Before 1875
What is the year range of Classical Gold Standard?
1875-1914
The first full-fledged gold standard, however,
was not established until 1821 in what country?
Great Britain
It was effectively on the gold standard
beginning in the 1850s and formally adopted
the standard in 1878.
France
The majority of countries got off gold in 1914
when this event broke out
World war I
An international gold standard can be said to
exist when, in most major countries,
(i) gold alone is assured of unrestricted coinage,
• (ii) there is two-way convertibility between gold
and national currencies at a stable ratio, and
• (iii) gold may be freely exported or imported
a monetary
principle stating that when there are two
forms of commodity money in circulation,
which are accepted by law as legal tender and
have the same face values.
Gresham’s Law
The price-specie flow mechanism is a model developed
by David Hume to explain how trade
imbalances can be automatically adjusted
under the gold standard.
Price-Specie-Flow Mechanism
What is the year duration of Interwar Period?
1915-1944
During this period, countries widely
used this of their currencies as a means of gaining advantages
in the world export market.
Predatory Depreciation
which replaced Great
Britain as the dominant financial power?
United States
He played a key role in restoring the gold standard in 1925. Besides
Great Britain, such countries as Switzerland,
France, and the Scandinavian countries
restored the gold standard by 1928.
Winston Churchill
In July 1944, representatives of 44 nations
gathered in this place to discuss and design the post-war
international monetary system
Bretton Woods, New Hampshire
The agreement of Bretton Woods was subsequently ratified by
the majority of countries to launch the this in
1945.
International Monetary Fund
What year is the duration of Bretton Woods System?
1945-1972
What is the other name of World Bank?
International Bank for Reconstruction and Development
The British delegates led by John Maynard
Keynes proposed an international clearing
union that would create an international
reserve asset called
Bancor
In 1963, President John Kennedy imposed the
this on U.S. purchases of foreign securities in order to
stem the outflow of dollars.
Interest Equalization Tax (IET)
In August 1971, President Richard Nixon
suspended the convertibility of the dollar into
gold and imposed what?
10 percent surcharge
In an attempt to save the Bretton Woods
system, these countries met at the Smithsonian
Institution in Washington, D.C., in December
1971. What is the name of the countries?
Group of Ten
What is this agreement, according to which
• (i) the price of gold was raised to $38 per ounce,
• (ii) each of the other countries revalued its
currency against the U.S. dollar by up to 10
percent, and
• (iii) the band within which the exchange rates
were allowed to move was expanded from 1
percent to 2.25 percent in either direction.
Smithsonian Agreement
European and Japanese
currencies were allowed to float, completing
the decline and fall of the Bretton Woods
system. When is it?
March 1973
