Chapter 6, Problem 15QA

An important problem with the gold standard was that a. one country could easily manipulate the system to its advantage and the disadvantage of other countries. b. a country did not have control of its domestic monetary policy. c. exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans. d. it was too complicated and restricted business activity.

If a country’s par exchange rate is overvalued, what kind of intervention would that country’s central bank be forced to undertake, and what kind of effect would it have on its international reserves? What must happen if this country’s central bank decides not to intervene anymore?

Shortly after the invasion of Ukraine, sanctions impeded the ability of the Russian central bank to use its international reserves to stabilize the ruble. The Russian central bank would have liked to do this by:   A. selling rubles to buy yuan   B. selling rubles to buy dollars   C. selling other currencies to buy rubles   D. all of these