Question

Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the US dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold.

Based on your understanding of the international monetary system, complete the following statements:

• A ________ exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

• The government does not set a ________ exchange rate, which means that supply and demand in the market determine the currency’s value.

• When American customers import more from Europe than they export to Europe, the euro_______ relative to the dollar.

• The __________________ of a currency refers to an increase or decrease of the stated par value of a currency whose value is fixed.

• Under a ______________ floating regime, supply and demand for the currency determine the exchange rate. Currencies under such a regime are called currencies.

• A __________ occurs when a country agrees to exchange its own currency for a specified foreign money unit at a fixed exchange rate and legislates domestic currency restrictions unless it has the foreign currency reserves to cover requested exchanges.

Options
1- Forward, spot
2- Pegged, Floating
3- appreciates, depreciates
4- devaluation or revaluation, depreciation or appreciation
5- freely, managed 6- convertible, nonconvertible
7- fixed-peg arrangement, currency board arrangement

Answer 1

Step-by-step explanation:

• A forward exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

• The government does not set a floating exchange rate, which means that supply and demand in the market determine the currency’s value.

• When American customers import more from Europe than they export to Europe, the euro depreciates relative to the dollar.

The revaluation of a currency refers to an increase or decrease of the stated par value of a currency whose value is fixed.

• Under a freely floating regime, supply and demand for the currency determine the exchange rate. Currencies under such a regime are called convertible currencies.

• A fixed-peg arrangement occurs when a country agrees to exchange its own currency for a specified foreign money unit at a fixed exchange rate and legislates domestic currency restrictions unless it has the foreign currency reserves to cover requested exchanges.

Answer 2

Step-by-step explanation:

A forward exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

The government sets a fixed exchange rate that is allowed to fluctuate only slightly (if at all) around the par value.

When American customers import more from Europe than they export to Europe, the euro appreciate relative to the dollar.

The depreciation or appreciation of a currency refers to a decrease or increase, respectively, in the foreign exchange value of a floating currency.

Under a managed floating regime, the government plays a significant role in managing the exchange rate by manipulating the currency's supply and demand.

Currencies under such a regime are nonconvertible currencies.