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The E-Book Quiz

The E-Book Quiz will help you assess your understanding of important facts and concepts relating to international finance and development. Below are five basic questions relating to the E-Book.

  1. The IMF founders adopted a "gold exchange" standard. Which one of the following statements about that standard is the MOST accurate?
a. Each unit of a country's currency had to represent a certain weight of gold.
b. Central banks had to keep adequate stocks of gold as reserves.
c. The standard was based on a crawling peg.
d. Member countries had the right to sell dollars to the U.S. Federal Reserve for gold.
e. The standard was a floating exchange rate system.
  1. Which of the following accurately reflects criticism in the mid-1990s regarding the effect of the World Bank on indigenous peoples?
a. The World Bank blatantly ignored the rights of indigenous people and provided no structural safeguards to protect them.
b. Indigenous people relocated because World Bank-funded projects received adequate housing and sustenance.
c. World Bank guidelines often did not adequately safeguard the interests of indigenous people.
d. The “indigenous veto” was effective.
e. b and d above.
  1. Which of the following statements is/are the defining difference(s) between the international capital market and the global capital market?
a. The global capital market is a loose integration of markets that maintain their strong domestic regulations in a global market.
b. An international capital market is strictly tied to domestic markets in an international realm and does not include unregulated off-shore markets.
c. In a global capital market, government regulations are liberalized to compete with off- shore markets.
d. a and b above.
e. b and c above.
f. None of the above.
  1. Which of the following statements regarding the International Monetary Fund (IMF) is correct?
a. The IMF is a development bank.
b. Prior to the early 1970s, the IMF supervised an exchange rate system called "the gold standard."
c. With respect to voting power, each member country of the IMF has one vote--i.e., one vote per country.
d. "Conditionality" refers to IMF membership requirements.
e. Exchange rate surveillance became important after the collapse of the Bretton Woods system in the early 1970s.
  1. Which of the following statements INACCURATELY describes criticism of the World Bank?
a. The Bank has always placed too much emphasis on private-sector development.
b. Bank-funded projects have contributed to massive environmental damage.
c. Bank-funded projects have threatened the rights of indigenous peoples.
d. The Bank's structural adjustment programs have imposed significant social costs on vulnerable groups in developing countries. 
  1. Which of the following is/are NOT a true statement regarding the structure of capital markets?
a. The majority of capital transactions occur in the primary markets such as the New York Stock Exchange.
b. Purchasers of equity securities are creditors who receive future income for their investments.
c. The most common type of debt security is stock.
d. The value of a bond is that it can be issued only by a national, local or municipal government agency, creating a higher chance of return.
e. a and c above.
f. None of the above.
g. All of the above.
  1. The New International Economic Order (NIEO) demanded all of the following EXCEPT:
a. redistribution of wealth from the developed countries to the developing countries.
b. more participation by developing countries in the decision-making process that affected world issues.
c. greater equality between developed countries and developing countries by equalizing terms of trade between developing and developed countries.
d. full permanent sovereignty of developing countries over their natural resources.
e. reallocation of trading power through cartels, regional blocks, and codes of conduct for multinational corporations.
  1. After critics claimed that a "top down" approach to development did not maximize benefits to developing countries, the World Bank responded by:
a. curtailing influence of NGOs that espouse Western idealism over the legitimate concerns of the local population.
b. enacting a program of "participatory development" that focuses on the central role of government participation in development.
c. embracing a grassroots approach to development that takes into account such issues as income distribution and human rights.
d. reminding critics that economic improvement cannot occur without some pain of adjustment.
e. creating an Inspection Panel that grants NGOs legal personality to directly participate in the World Bank's decision-making process.
  1. Which one of the following statements does NOT correctly describe an aspect of the debt crisis of the 1980s?
a. Petrodollars dramatically increased in U.S. and European banks deposits, which induced those banks to make loans to governments and state-owned entities in developing countries.
b. In early 1980s, developing countries experienced a significant drop in their exports, which led to unsustainable current account deficits.
c. The strong dollar and high global interest rates had adverse impacts on the foreign exchange reserves of developing countries.
d. Private individuals and entities in developing countries exacerbated the financial conditions by transferring money out of the countries.
e. Commercial creditor banks, particularly the big U.S. banks, were so well capitalized at the onset of the debt crisis that they could offset the massive loan losses against their loan loss reserves.
  1. Which one of the following might be considered a disadvantage of financial globalization?
a. Access to cheaper capital.
b. Increased competition between borrowers.
c. Access to more sophisticated types of investments.
d. Possibility of reducing investment risks.
e. Financial institutions' opportunity to access to new markets.
  1. The trend in sources of funds for developing countries in the first half of the 1990s was:
a. an increase in the amount of portfolio equity flows, but not in foreign direct investment.
b. the augmented use of private sources of capital without a reduction in public sources of capital.
c. a decrease in the amount of portfolio equity flows and an increase in direct foreign investment..
d. a heightened reliance on multilateral institutions to provide funds to developing countries.
e. b and c above.
f. b, c, and d above.
  1. Which one of the following arguments was NOT used to support the view that the IMF should be abolished?
a. The IMF duplicates the disciplining tendencies of private capital markets.
b. The IMF directs money to countries that are not able to use it efficiently.
c. The promise of IMF-sponsored bailouts creates a moral hazard in recipient countries.
d. The IMF has an overly cooperative political nature that leads it to support repressive or incompetent regimes that might otherwise fail.
e. The IMF has needlessly interfered with the operation of financial markets.
  1. The World Bank adopted to criticism that it relied on the quantity of loans over the quality of programs in all the following ways EXCEPT:
a. insistence that its policies will create the greatest overall economic benefit.
b. a concerted effort for greater feedback from those that the project is intended to benefit.
c. concentrating its resources on smaller projects.
d. greater transparency.
e. none of the above.
  1. Which of the following best explains the failure, if any, of the linear-stages of growth model in developing countries:
a. The model did not place enough emphasis on increasing savings and investment in developing countries.
b. The model did not take into account the role social structures play in achieving sustained economic growth.
c. The model failed to recognize the importance of foreign investment or aid.
d. a and c above.
f. The linear stages of growth model was not a failure; it was very successful (e.g., the Marshall Plan).
  1. “Growth with marginalization” is a term coined by:
a. the World Bank.
b. the IMF.
c. the World Trade Organization.
d. Neo-Marxist development theory.
e. None of the above.
  1. The IMF responded to criticism that the 1980s structural adjustment programs resulted in reduced expenditures for vulnerable groups by:
a. an unapologetic insistence that the adjustments in local economies will ultimately yield an economic benefit greater than the loss.
b. the creation of "safety nets" designed to minimize the harsh effects of the adjustments.
c. lessening the number of structural adjustments attached to its funds.
d. a and b above.
e. b and c above.
  1. If a country borrowing funds from the IMF does not comply with the conditions of the loan, all the following methods are available to force compliance EXCEPT:
a. withholding future funds.
b. bringing suit for breach of contract.
c. prohibiting on the country's use of the General Resources Account.
d. collaborating with member countries to cajole the reluctant country into compliance.
e. expelling the country from the IMF.
  1. Which of the following relate(s) to financial globalization?
a. The spread of democracy throughout the world because of the impact of liberalized capital flows.
b. Reductions in government spending and government employment.
c. A global trend by governments to privatize businesses.
d. b and c above.
e. a, b, and c above.
f. None of the above.
  1. Which of the following concepts is/are usually associated with "globalization?"
a. The declining importance of national borders.
b. Increased international trade.
c. The spread of information technology.
d. Cross-border financial flows.
e. Cultural transfers.
f.  a, c and d above.
g. b, c and d above.
h. All of the above.
  1. Which of the following is/are relevant to the World Bank's program of good governance?
a. The processes that the World Bank implements to manage a country's resources.
b. The form of political regime that a government adopts.
c. A government's capacity to effectuate economic change.
d. a, b, and c above.
e. a and b above.
f. a and c above.
g. None of the above.
  1. Which one of the following statements does NOT describe the IMF stabilization programs implemented during the debt crisis of 1980s?
a. Reduction in public expenditure.
b. Revaluation of the country’s currency.
c. Reduction of money supply.
d. Wage-freeze of state employees.
e. Reduction of fiscal deficit.
  1. The primary function of the IMF as expressed in Article 1 is:
a. the regulation of capital flow between countries.
b. to provide assistance and debt relief to economically unstable countries.
c. to introduce industrialization to developing countries.
d. to keep the international monetary system running smoothly.
e. to encourage the economic growth of individual member countries.
  1. Even though hedge funds are not the biggest players in the world of institutional investing, they substantially affect the world capital market because:
a. they are private investment limited partnerships that provide limited partners with limited liabilities.
b. they are willing and able to use highly leveraged investment strategies.
c. their shares are generally traded in organized exchanges.
d. they have the ability to enjoy the maximum profits of their investments while they can limit the level of losses.
e. they are generally not subject to U.S. regulations and disclosure requirements.
f. a and c above.
g. b and e above.
  1. Who articulated a "theory of unemployment" that inspired state-led development policies?
a. Adam Smith
b. Karl Marx
c. Alfred Marshall
d. Vladimir Lenin
e. John Maynard Keynes
  1. Which of the following best describes a feature of a development concept that relies on market-friendly policies?
a. Non-inflationary growth, fiscal discipline, low savings and high investment rates.
b. Trade and foreign investment liberalization, privatization, and domestic market regulation.
c. A state role that is limited to functions that the private sector cannot or will not perform (e.g., maintaining a functioning legal system).
d. Selected use of quotas and tariffs to regulate trade and state-owned enterprises.
e. a and b above.
f. b and c above.
g. c and d above
  1. Which of the following is a statement that accurately describes the scope of conditions allowed by the IMF Charter?
a. The Charter creates no substantive restraints on the type of conditions.
b. Unlike the World Bank, the IMF Charter does not allow the Fund to evaluate the social and political policies of members.
c. The Charter curtails IMF involvement in the member country's social policies, but allows the Fund's involvement in the political process.
d. The IMF Charter underlies the IMF's commitment to avoid linking even the most egregious human rights violations to its lending.
e. The IMF Charter requires that the IMF respect the social and political policies of member countries.
  1. Which of the following is NOT a criticism of the neo-Marxist theory of economics?
a. The neo-Marxist theory was too formalistic to be useful.
b. The neo-Marxist theory questioned too many assumptions supporting development theory based on capitalism.
c. Heeding neo-Marxism calls for self-sufficient development would lead to economic stagnation in developing countries.
d. Neo-Marxists incorrectly concluded that developing countries could not attain the capitalist mode that Marx deemed necessary for a socialist revolution.
e. The neo-Marxist theory failed to explain patterns of specialization in developing countries.
  1. In the mid-1990s, critics of the World Bank believed industrialized countries:
a. benefited developing countries by providing an example of proper environmental regulations for a sustainable ecosystem.
b. relied too heavily on manufactured raw materials from developing countries resulting in unsustainable exploitation of resources.
c. provided technology that allows developing countries to use resources efficiently.
d. imposed industrial countries’ environmental standards in developing countries to undertake environmentally harmful projects.
e. b and d above
f. none of the above
  1. The following statement best describes what school of economic thought:
    "Because developing countries are heterogeneous, public policies designed to bring about rapid, sustained growth must combine traditional economic analysis with a broader multidisciplinary approach to pinpoint the cultural, political, economic, and institutional mechanisms, both internal and external, impeding economic progress."
a. Classical/ Neo-classical Economics
b. Development Economics
c. Marxist Economics
d. Capitalist Economics
  1. Which one of the following is NOT considered a major aspect of the 1994-95 Mexican financial crisis?
a. Over-dependence on foreign institutional investors.
b. Huge capital inflows through foreign direct investments.
c. A significant current account deficit and a sizeable capital account surplus.
d. The government's insistence on defending the pegged exchange rate.
e. Political instability prompted with the assassination of the ruling party's leaders.
  1. Which of the following provided the basis for economic changes that occurred in Latin American after the onset of the debt crisis in the early 1980s and for the transformation of socialist economics after the fall of the Soviet Union?
a. Structuralism
b. Linear-stages of Growth Model
c. Neo-Marxism or Dependency Theory
d. Marxism
e. Neo-classical Revival
  1. All of the following contribute to corruption EXCEPT:
a. numerous government agencies offering the same services.
b. regulatory schemes.
c. civil servants' discretion of power in performing their appropriate duties.
d. a and b above.
e. b and c above.
  1. All of the following are conditions which the Korean government promised to perform in exchange for assistance from the IMF in the late 1990s EXCEPT:
a. abolishment of the court approval requirement for layoffs resulting from mergers.
b. introduction of a deposit insurance system.
c. allowance of bank failures.
d. increase of foreign stock ownership up to 50 percent.
e. creation of a new and powerful regulatory agency to oversee the financial system.
f. opening legal and accounting markets to foreign countries.
  1. Which one of the following statements does NOT correctly describe the World Bank’s structural adjustment lending during the debt crisis of 1980s?
a. The World Bank sought to increase economic efficiency by focusing on the demand side of economy.
b. The measures included liberalization of domestic and foreign trade, and privatization of public enterprises.
c. The lending was policy-based and focused on sectors of the economy.
d. The lending was short-term in nature.
e. The lending carried conditionality.
f. c and d above.
g. a and d above.
h. a, c and d above.
  1. All of the following correctly describe an NGO's influence on inter-governmental organizations EXCEPT:
a. NGOs can generate a great deal of public enthusiasm over an issue, which can capture international attention.
b. Both domestic and international law have granted NGOs formal legal recognition, solidifying their role as representatives of a party's interest.
c. Treaties often grant NGOs observer status, encouraging their influence in the application of the treaty.
d. International organizations will use NGOs for their technical expertise in a given area.
e. None of the above.
  1. Which of the following accurately describes a difference between the IMF and the World Bank?
a. The voting system of the World Bank allocates greater voting power to the countries with greater economic strength.
b. The IMF is an international institution focused on economic matters.
c. Loans from the World Bank traditionally went to projects to promote economic growth in a country.
d. The IMF receives the majority of its funds from members' quotas, while the World Bank primarily funds its lending by selling bonds in the world's capital market.
e. All of the above.
f. a and c above.
g. c and d above.
  1. The system of voting employed by the IMF:
a. provides one vote per member country.
b. allocates greater voting power to wealthy countries with larger quotas.
c. is less often used to decide matters, in favor of an approach based on a consensus between member countries.
d. a and c above.
e. b and c above.
  1. In response to the 1994-95 Mexican financial crisis, the IMF adopted all of the following reforms to adjust itself to the new realities of the global economy EXCEPT:
a. Special Data Dissemination Standards.
b. Emergency Financing Mechanism.
c. New Arrangements to Borrow.
d. Dissemination Standards Bulletin Board.
e. Bank Advisory Committees.
  1. Which of the following do/does NOT reflect a criticism of the IMF's and World Bank's efforts to promote good governance?
a. Judicial reform is unlikely to be effective in traditional societies that use less formal means of dispute resolution.
b. The IMF believes that market forces have a disciplining effect on any given country.
c. Reforms imposed on a developing country by the IMF encroach on the country's sovereignty.
d. The World Bank and IMF fail to ground reform measures in the reality of the affected country.
e. a and b above.
f. b and c above.
  1. The Asian financial crisis first erupted in:
a. Malaysia 
b. Indonesia 
c. Korea
d. Thailand
e. Philippines 
  1. In order to prevent future crises, the IMF advised member countries in the late 1990s to adopt "good governance" prescriptions which include all of the following EXCEPT:
a. increasing the transparency of financial transactions.
b. increasing the transparency of corporate structure and valuation.
c. implementing "Western-style" bank regulations.
d. liberalizing trade policies further.
e. None of the above.
  1. Which one of the following countries survived the Asian financial crisis without the assistance of the IMF?
a. Indonesia
b. Korea
c. Malaysia
d. Philippines
e. Thailand
  1. Which one of the following statements MOST correctly describes the World Bank and IMF?
a. Both of the World Bank and IMF initially engaged in short-term lending to support depressed economies of their member countries.
b. The World Bank, like the IMF, funds its loans primarily from quota subscriptions from its members.
c. The IMF has come to resemble the World Bank to the extent that the Fund now concerns itself with structural issues and no longer restricts itself to short-term lending.
d. Only countries that are members of the World Bank can become members of the IMF.
e. Each member of the World Bank has one vote in the World Bank, while each member's voting power in the IMF depends on its quota subscription to the Fund.
  1. Which two countries' competing interests held the greatest influence with respect to the founding of the IMF?
a. United States as a creditor nation and the United Kingdom representing debtor nations.
b. United Kingdom as creditor nation and the United States as a debtor nation.
c. Brazil representing developing nations and the United States representing developed nations.
d. France representing Western countries and Japan representing Asian countries.
e. None of the above.
  1. The World Summit for Social Development held in Copenhagen, Denmark, produced a “new organizing concept” called “social development,” which is aimed at addressing a post-Cold War world that has failed to fulfill liberalism’s universal promise of peace and prosperity. Which of the following statements describes “social development”:
a. A participatory and enabling environment for social development with a state-centered framework that accounts for political, economic, ethical and spiritual perspectives.
b. Efforts that are primarily the responsibility of advanced, developed nations and the IMF and World Bank.
c. Efforts that are primarily the responsibility of individual states themselves, but that also require the contribution of other international actors in the international community, including the IMF and World Bank.
d. Progress that is measured by the aggregate increases in social wealth and technological advances.
e. a and b above.
f. a and c above.
  1. The founders of the IMF believed the best method to create international economic stability following World War II was:
a. the "gold standard" requiring countries to maintain an official parity between a country's currency and gold.
b. by dissolving all trade barriers between member countries.
c. fixed exchange rates where a member country declared a par value for its currency in relation to the dollar.
d. fostering economic growth in developing countries.
e. floating exchange rates dictated by the demands of the market.
  1. Where and when did the structuralist school of economics develop?
a. In Europe in the 1940s.
b. In Latin America in the 1940s.
c. In Asia in the 1980s.
d. In Mexico in the 1980s.
e. a and b above.
  1. Which of the following is NOT an accurate criticism of NGO's role in development?
a. NGOs focus too heavily on one issue and fail to see larger concerns.
b. The leaders of NGOs, who often are elected by the NGO's members, wield the unchecked power of popular sentiment.
c. Developing countries are often wary of the influence NGOs have and curtail their freedom.
d. NGOs fail to account for the myriad influences that control a country and focus too strongly on government actors.
e. None of the above.
  1. The term "globalization" commonly refers to all of the following EXCEPT:
a. increased trade among nations.
b. the augmented importance of national identity.
c. the spread of technology within a country's borders.
d. accelerated economic integration.
e. cultural integration of different groups along regional lines.
f. b, c, and e above.
g. b and e above.
h. None of the above.
  1. Which of the following does NOT describe an aspect of what structuralist economists believed to be the remedy for the problem of a "dual economic structure"?
a. Expand the industrial sector of the economy.
b. Have an economy in which total output would be divided equally among all of the country's economic sectors.
c. The use of government imposed tariffs and state-owned enterprises to help industrialize the economy.
d. Remove all government involvement and let free market forces remedy the problem.
e. a and c above.
f. a and d above.
  1. Which of the following was a criticism during the mid-1990s regarding policies of the IMF and the World Bank?
a. By their nature, the IMF and the World Bank only deal with governments which created inefficient state- driven economies.
b. The IMF failed to analyze the economic vitality of the private investors which receive loans directly from the IMF.
c. The World Bank placed too great of an emphasis on past credit history of a country before approving funds.
d. Both the World Bank and the IMF made loans to individuals and corporations without allowing the state to monitor the use of these loans.
e. None of the above.
  1. Which of the following statements is LEAST correct regarding the IMF?"
a. The IMF created Special Drawing Rights (SDRs), which are international reserve assets that supplement the existing official reserves of member countries. SDRs are neither a currency nor claims on the IMF. Rather, they are potential claims on the freely usable currencies of the IMF members.
b. The Enhanced Structural Adjustment Facility was created to provide concessional loans for poor countries experiencing protracted balance-of-payments problems.
c. The IMF created a lending facility to provide compensatory and contingency financing for shortfalls in export earnings or rises in costs of cereal imports.
d. The IMF initially focused on providing loans for infrastructure projects.
e. The IMF has a facility to provide financial assistance for exceptional balance-of-payment difficulties because of sudden and disruptive losses of market confidence.




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