Couple questions here...
"Under fixed exchange rates,"
A. The Free Market is the major determinant of the exchange rate.
B. Official government transactions maintained the agreed-upon exchange rate by buying and selling foreign exchange.
C. The balance of payment is ignored.
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"Since World War II, the international financial system has been coordinated:"
A. By a fixed exchange rate system only.
B. By a flexible exchange rate system only.
C. First by a fixed exchange rate system and then by a flexible exchange rate system.
Thanks everyone!
To answer these questions, let's break down the options and see which one is correct for each question.
Question 1: "Under fixed exchange rates,"
A. The Free Market is the major determinant of the exchange rate.
B. Official government transactions maintained the agreed-upon exchange rate by buying and selling foreign exchange.
C. The balance of payment is ignored.
To determine the correct answer, we need to understand what fixed exchange rates mean. In a fixed exchange rate system, the value of a country's currency is fixed or pegged to another currency or a basket of currencies.
Option A is incorrect because under fixed exchange rates, the free market is not the major determinant of the exchange rate. Instead, the government or monetary authorities play a significant role in maintaining the fixed rate.
Option B is correct. Under fixed exchange rates, official government transactions are used to keep the exchange rate at the agreed-upon level. Governments buy and sell foreign exchange reserves to balance the supply and demand for the currency and maintain the fixed rate.
Option C is incorrect because the balance of payments is not ignored under fixed exchange rates. The balance of payments is still important in assessing a country's international transactions, including the inflow and outflow of foreign exchange.
Therefore, the correct answer is B. Official government transactions maintained the agreed-upon exchange rate by buying and selling foreign exchange.
Moving on to the second question:
Question 2: "Since World War II, the international financial system has been coordinated:"
A. By a fixed exchange rate system only.
B. By a flexible exchange rate system only.
C. First by a fixed exchange rate system and then by a flexible exchange rate system.
To determine the answer, we need to understand the historical context after World War II.
Option A is incorrect because the international financial system after World War II was not solely coordinated by a fixed exchange rate system. There have been significant changes in the international financial system over the years.
Option B is incorrect because it implies that the international financial system has always been coordinated by a flexible exchange rate system, which is not true.
Option C is correct. Since World War II, the international financial system has evolved, initially starting with a fixed exchange rate system called the Bretton Woods system, which was followed by a transition to a flexible exchange rate system. The Bretton Woods system, established in 1944, collapsed in the early 1970s, leading to the adoption of flexible exchange rates.
Therefore, the correct answer is C. First, by a fixed exchange rate system, and then by a flexible exchange rate system.
I hope this explanation clarifies the answers to your questions!