ECON 4131, International Finance, Spring 2002, Exam 3 Final Essay examp

Final Exam Questions -- Economics 4131, Spring 2006 1. Explain how the gold standard operated in the classical period (1870-1914). What were the advantages and disadvantages? Some say the gold standard sacrificed internal balance to external balance. How? What were the â€Å"rules of the game† and what would happen when they were violated? What would happen when the demand for monetary gold rose faster than the supply, and why was this a problem? 2. Explain the functioning of the Bretton Woods currency arrangement. Why was it designed as it was? What strains appeared over time, and what factors led to its collapse? What was â€Å"Triffin’s dilemma†? 3. Use the national income accounting identity to explain the phenomenon of â€Å"twin deficits.† Explain how the surge in the U.S. fiscal deficit has spilled into a need for international finance. What are the current sources of this finance? Describe the dilemma facing the Asian central banks. Describe the â€Å"hard landing† scenario. What needs to be done to ensure a â€Å"soft landing†? 4. Explain step-by-step why and how a central bank might w...