IBUS 410 FINAL EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
The International Monetary System - Answers The institutional arrangement that governs exchange
rates.
Floating exchange rate - Answers Where the foreign exchange market determines the relative value
of a currency.
Pegged exchange rate - Answers When the value of a currency is fixed to a reference country.
Managed-float or dirty-float system - Answers When the value of a currency is determined by market
forces, but with central bank intervention if it depreciates too rapidly.
Fixed exchange rate system - Answers Countries fix their currencies against each other at a mutually
agreed upon value.
Dollarization - Answers When a country abandons its own currency and adopts another, typically the
U.S. dollar.
Origin of the Gold Standard - Answers Dates to ancient times when gold coins were a medium of
exchange, unit of account, and store of value.
Strength of the Gold Standard - Answers Key strength was its powerful mechanism for allowing all
countries to achieve balance-of-trade equilibrium.
The Period Between the Wars: 1918 to 1939 - Answers The gold standard ended in 1939 after
countries started regularly devaluing their currencies.
Bretton Woods Agreement - Answers A new international monetary system designed in 1944 to
facilitate postwar economic growth.
Role of the I M F - Answers Discipline and flexibility in maintaining order in the international
monetary system.
Role of the World Bank - Answers Initial mission was to refinance rebuilding of post-war Europe.
Collapse of the Bretton Woods System - Answers Can be traced to U.S. macroeconomic policy
decisions from 1965 to 1968.
Floating exchange rate regime - Answers Formalized in 1976 during the Jamaica meeting of I M F
members.
Monetary Policy Autonomy - Answers Removal of obligation to maintain exchange rate parity
restores monetary control to a government.
Trade Balance Adjustments - Answers Balance-of-payments adjustment mechanism works more
smoothly under a floating exchange rate regime.
Crisis Recovery - Answers Supporters argue that floating rates help countries deal with economic
crises automatically.
Modern Role of the I M F - Answers Now focuses on lending money to countries experiencing
financial crises.
Financial Crises in the Post-Bretton Woods Era - Answers Currency crisis results in sharp depreciation
or large expenditures of international reserves.
Currency crisis - Answers When a speculative attack on the exchange value of a currency results in a
sharp depreciation in the value of the currency, or forces authorities to expend large volumes of
international currency reserves and sharply increase interest rates to defend prevailing exchange
rates.
Banking crisis - Answers A loss of confidence in the banking system that leads to a run on the banks.
Foreign debt crisis - Answers When a country cannot service its foreign debt obligations, whether
private sector or government debt.
Hedging - Answers A firm that protects itself against foreign exchange risk.
Spot exchange rates - Answers Rate at which a foreign exchange dealer converts one currency into
another currency on a particular day.
Forward exchange rates - Answers The exchange rate governing a forward exchange, where two
parties agree to exchange currency and execute the deal at a specific date in the future.
Foreign Exchange Market - Answers Global network of banks, brokers, and foreign exchange dealers
connected by electronic communications systems.
Arbitrage - Answers Process of buying a currency low and selling it high.
Strategy - Answers The actions taken by managers to attain the goals of the firm.
Profitability - Answers The rate of return the firm makes on its invested capital.
Profit growth - Answers The percentage increase in net profits over time.
Value Creation - Answers Activities that increase the value of goods or services to consumers.
The International Monetary System - Answers The institutional arrangement that governs exchange
rates.
Floating exchange rate - Answers Where the foreign exchange market determines the relative value
of a currency.
Pegged exchange rate - Answers When the value of a currency is fixed to a reference country.
Managed-float or dirty-float system - Answers When the value of a currency is determined by market
forces, but with central bank intervention if it depreciates too rapidly.
Fixed exchange rate system - Answers Countries fix their currencies against each other at a mutually
agreed upon value.
Dollarization - Answers When a country abandons its own currency and adopts another, typically the
U.S. dollar.
Origin of the Gold Standard - Answers Dates to ancient times when gold coins were a medium of
exchange, unit of account, and store of value.
Strength of the Gold Standard - Answers Key strength was its powerful mechanism for allowing all
countries to achieve balance-of-trade equilibrium.
The Period Between the Wars: 1918 to 1939 - Answers The gold standard ended in 1939 after
countries started regularly devaluing their currencies.
Bretton Woods Agreement - Answers A new international monetary system designed in 1944 to
facilitate postwar economic growth.
Role of the I M F - Answers Discipline and flexibility in maintaining order in the international
monetary system.
Role of the World Bank - Answers Initial mission was to refinance rebuilding of post-war Europe.
Collapse of the Bretton Woods System - Answers Can be traced to U.S. macroeconomic policy
decisions from 1965 to 1968.
Floating exchange rate regime - Answers Formalized in 1976 during the Jamaica meeting of I M F
members.
Monetary Policy Autonomy - Answers Removal of obligation to maintain exchange rate parity
restores monetary control to a government.
Trade Balance Adjustments - Answers Balance-of-payments adjustment mechanism works more
smoothly under a floating exchange rate regime.
Crisis Recovery - Answers Supporters argue that floating rates help countries deal with economic
crises automatically.
Modern Role of the I M F - Answers Now focuses on lending money to countries experiencing
financial crises.
Financial Crises in the Post-Bretton Woods Era - Answers Currency crisis results in sharp depreciation
or large expenditures of international reserves.
Currency crisis - Answers When a speculative attack on the exchange value of a currency results in a
sharp depreciation in the value of the currency, or forces authorities to expend large volumes of
international currency reserves and sharply increase interest rates to defend prevailing exchange
rates.
Banking crisis - Answers A loss of confidence in the banking system that leads to a run on the banks.
Foreign debt crisis - Answers When a country cannot service its foreign debt obligations, whether
private sector or government debt.
Hedging - Answers A firm that protects itself against foreign exchange risk.
Spot exchange rates - Answers Rate at which a foreign exchange dealer converts one currency into
another currency on a particular day.
Forward exchange rates - Answers The exchange rate governing a forward exchange, where two
parties agree to exchange currency and execute the deal at a specific date in the future.
Foreign Exchange Market - Answers Global network of banks, brokers, and foreign exchange dealers
connected by electronic communications systems.
Arbitrage - Answers Process of buying a currency low and selling it high.
Strategy - Answers The actions taken by managers to attain the goals of the firm.
Profitability - Answers The rate of return the firm makes on its invested capital.
Profit growth - Answers The percentage increase in net profits over time.
Value Creation - Answers Activities that increase the value of goods or services to consumers.
