Exchange Rates Quiz

All of the following factors contributed significantly to the chronic deficit in our balance of payments during the 1960s and 1970s EXCEPT:

• rapidly expanding technology in Europe and Japan.
• mounting U.S. military expenses.
• foreign investment by American firms.
• increased foreign demand for American exports.

If the exchange rate of dollars to francs is $0.14, then the exchange rate of francs to dollars is:

• 1.4:1
• 86:1
• 14:1
• 7:1

The MAIN reason that President Roosevelt went off the gold standard was that:

• he believed that a devalued dollar might rekindle a failing economy.
• he foresaw the establishment of a new international agreement under the Bretton Woods system.
• rumors that Britain would soon abandon the gold standard could no longer be ignored.
• many economists of the time predicted higher dollar values if the gold standard were abandoned.

The MAIN criticism most economists of today would probably make of the Bretton Woods agreement is that it:

• was inherently inflexible, and thus not adaptable to changing economic conditions.
• was based on the false assumption that the ability of one country to compete with another changes over time.
• depended too heavily on adherence to the gold standard.
• demanded a fundamental realignment of currencies for which most countries were unprepared.