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Chapter Nine: The International Institutions Multiple-Choice Questions 1. The Bretton Woods System ________. Financial a. is an economic plan developed in response to the b. c. d. e. economic crisis caused by the Second World War established the World Bank to guarantee national deposits and to stimulate economic development laid the basis for the original roles of the International Monetary Fund and World Bank originated from a Financial Conference held at Brettons Wood in July 1944, which devised an international monetary financial plan to help decrease world debt a package of economic stimulus reforms, devised by Sir Bretton Woods, that enabled the defeated nations of the Second World War to progress economically 2. Foreign portfolio investments are those which ________. a. are not made in an enterprise form and include the b. c. d. e. purchase of foreign debt, loans, and stock market investments only include stock market and loan investments in foreign countries may be subject to International Tax and Trade Treaties ,on average, provide higher rates of return when there is economic and social stability usually include foreign debt and are therefore riskier investments 3. The Washington Consensus was not formed around which of the following key issues ________. a. macroeconomic prudence b. microeconomic prudence c. export-oriented growth d. economic liberalization 4. In what year was the Bretton Woods Conference held? a. b. c. d. e. 1924 1934 1944 1964 1984 5. When was the International Monetary Fund established? a. b. c. d. e. 1940 1945 1950 1955 1960 6. The World Bank was previously known as ________. a. the International Development Bank b. the World Bank for International Development c. the Bretton Woods International Bank of Reconstruction and Development d. the International World Bank e. the International Bank of Reconstruction and Development 7. The International Bank of Reconstruction and Development was originally designed to ________. a. stimulate the economies of war-torn Western European b. c. d. e. countries by offering low interest rates on loans make loans to war-torn Western European countries at preferential rates of interest make high interest rate loans available to war-torn Western European countries so that state infrastructure could be rebuilt oversee the activities and functions of the International Monetary Fund rescue banks in war-torn Western Europe 8. What percentage of the voting rights within the IMF and World Bank is currently held by the US? ________ per cent. a. b. c. d. e. 2 7 15 17 25 9. What percentage of the votes within the IMF and the World Bank are required for a constitutional amendment to pass? ________ per cent. a. b. c. d. e. 70 80 85 90 95 10. The ________ brought a great deal of ‘turbulence’ to international financial institutions. a. b. c. d. e. 1950s 1960s 1970s 1980s 1990s 11. US president Richard Nixon effectively abolished the original Bretton Woods system in 1971 by ________. a. abandoning the gold-standard in favour of a fixed rate of b. c. d. e. exchange suspending the convertibility of dollars to gold effectively pulling the United States out of key IMF agreements suspending American payments to the UN annulling commitments to regulate structural development policies 12. ________ was the first to threaten default on an outstanding debt. a. Brazil b. c. d. e. Chile India Mexico Ethiopia 13. In regards to development, in the late 1990s the World Bank moved to what it called a ________. a. b. c. d. e. singular approach comprehensive approach strategic approach comprehensible approach compassionate approach 14. The ‘Asian crisis’ also strongly affected ________. a. b. c. d. e. f. Argentina Egypt Russia Brazil Both a and d. Both c and d. 15. The initial function of the World Bank was to ________. a. work b. c. d. e. with the IMF to implement Structural Development Programs rescue the defeated nations of Europe from spiralling inflation set up a debt repayment schedule for the war-torn nations of Europe provide oversight and regulation for international banking activity provide financing for postwar reconstruction and development projects 16. On joining the International Monetary Fund, each country must ________. a. pay a subscription quota that is based loosely on its economy b. agree to participate in the auditing processes c. pay a subscription fee that is based on per capita GDP d. adhere to Terms and Conditions of the signatory statement e. pledge a minimum commitment of 0.35 per cent of GDP for International Aid 17. Within the World Bank, board representatives are chosen through ________. a. b. c. d. e. a committee vote shares delegate votes the Office of the Director lottery 18. Ensuring that currencies remained fixed was intended to ________. a. provide the stable monetary conditions necessary for expanding world trade b. provide the stable monetary conditions for debt repayment c. stimulate economic growth and reduce unemployment d. improve commodity markets and trade balances e. reduce inflationary pressures, yet promote trade 19. Loans from these institutions have generally been given to ________. a. nations that have the greatest need for financial b. c. d. e. assistance nations likely to produce a significant rate of return nations in which the citizens are highly involved in development projects democratic nations political allies of the US 20. Recently, US influence in international financial institutions has ________. a. b. c. d. e. increased slightly been harmed by outstanding UN membership payments diminished slightly been sharply criticised for being too influential diminished considerably True-or-False Questions 1. The World Bank now suggests that it needs to ‘empower’ the poor. T 2. The international financial institutions dissuade developing countries from accepting ‘foreign portfolio investments’. F 3. Good governance refers to a government’s ability to manage its markets. T 4. The Washington Consensus resulted in the dismantling of structural adjustment programs. F 5. The IMF originally functioned as an instrument to maintain international currency stability. T 6. In the first two decades of its existence the International Bank of Reconstruction and Development rarely funded big development projects. F 7. The ‘East Asian miracle’ can be attributed to the region embracing free-market policies. F 8. Structural adjustment programs improved social conditions in sub-Saharan Africa in the 1980s and 1990s. F 9. The Mexican Peso crisis preceded the apparent ‘boom’ in the country’s economy in the late 1980s and early 1990s. F 10. In the 1990s, the IMF discouraged developing countries from opening up their stock markets to foreign investors. F 11. The ‘Asian’ crisis also affected Russia and Brazil. 12. The Poverty Reduction Strategy papers formalized a clear division of labour between the World Bank and the IMF. T 13. The World Bank now concentrates on macro-economic development issues. F 14. The World Bank and the IMF no longer favour a market- centred approach. F 15. ‘Vulnerability’ and ‘voicelessness’ are now of primary focus in the World Bank’s strategies on poverty reduction. T 16. Only a severe economic crisis could allow the IMF to reassert its global power. T 17. The World Bank seeks to ‘empower’ the poor by encouraging the fostering of trade unions and encouraging wealth redistribution. F 18. International financial institutions provide development loans to the countries in the greatest need of assistance. F 19. The IMF and the World Bank gave new loans to keep countries from defaulting on their old loans. T 20. Conditionality was placed on loans from the World Bank, but not the IMF. F 21. Structural adjustment is associated with ‘project lending’. F 22. In the late 1990s, the bank moved to more ‘comprehensive’ approach to development. T 23. McNamara’s approach became known as the ‘basic needs’ approach. T Short-Answer Questions 1. Explain the initial function of the IMF. 2. Explain the initial function of the World Bank. 3. Compare and contrast Poverty Reduction Strategy Papers with structural adjustment policies. 4. Define and discuss the Washington consensus. 5. Discuss reasons for the establishment of the International Development Agency within the International Bank of Reconstruction and Development in 1960. 6. Discuss the governance structures of the IMF and the World Bank. 7. Discuss controversies related to the exercise of power within the IMF and the World Bank. 8. Explain the changes made by Robert McNamara when he became president of the World Bank in 1968. 9. Discuss the response of the IMF and the World Bank to the ‘debt crisis’ in the 1980s. 10. Discuss the implementation of ‘structural adjustment’ policies. 11. Discuss some of the ‘lessons’ the World Bank claimed to have learned about the successes and failures of structural adjustment programs in its 2001 report. 12. Explain how, according to the World Bank, political and legal systems were ‘failing the market’. 13. Discuss criticisms that have been levelled against the World Bank’s notion of ‘good governance’. 14. Explain the concept of ‘ownership’ as it relates to the IMF’s Poverty Reduction Strategy Papers. 15. How is the promotion of education and healthcare related to a market-centred approach? 16. Discuss the influence of the US on the international financial institutions. 17. How is the bank’s new approach to development more ‘comprehensive’? 18. What are some notable features of the World Bank’s ‘McNamara’ era? 19. Explain the ‘Mexican Peso Crisis’ and how it affected views on structural adjustment programs? 20. Are the IMF and World Bank still relevant?
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