Under Flexible Exchange Rates

question 7

Multiple Choice

Under flexible exchange rates,

• A)capital flows allow countries to execute policies on their own with no domestic ramifications.
• B)incentives are present that promote monetary policy coordination between countries because without coordination there can be changes in exchange rates and capital flows that feed back to the domestic economy.
• C)there is presently no monetary policy coordination between developed countries.
• D)monetary policy coordination is presently led by the World Bank.

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Definitions:

Bank Guarantee

A financial instrument provided by a bank on behalf of a client, ensuring payment to a beneficiary if the client fails to fulfill contractual obligations.

Contingent Liability

A potential financial obligation that may arise in the future, dependent on the occurrence of certain events.

Liability

An obligation arising from past transactions or events, which may result in an outflow of resources embodying economic benefits.

Provision

An amount set aside in the accounts to cover a probable future expense or liability, recognized for known obligations of uncertain timing or amount.