Test Bank + Answers | The International Financial – Ch.10

Chapter 10

The International Financial Institutions

Multiple Choice Questions

1. In what year was the Bretton Woods Conference held?
   1. 1904
   2. 1924
   3. 1944
   4. 1964
   5. 1984
2. Which of the following is true about the Bretton Woods system?
   1. It was an economic plan developed in response to the economic crisis caused by World War I.
   2. It established the World Trade Organization as the keystone of the global free trade regime.
   3. It laid the basis for the original roles of the International Monetary Fund and World Bank.
   4. It devised an international monetary financial plan to help decrease world debt.
   5. It was a package of economic stimulus reforms, devised by Sir Bretton Woods, that enabled the defeated nations of the World War II to progress economically.
3. What was the original name of the World Bank?
   1. The International Bank of Reconstruction and Development
   2. The Import-Export Bank
   3. The Bank for International Development
   4. The Bretton Woods Bank
   5. The Grameen Bank
4. What was the World Bank’s original purpose?
   1. To implement neoliberal structural adjustment policies
   2. To make loans to war-torn European countries at preferential rates of interest
   3. To provide short-term financing so countries could deal with balance of payments deficits
   4. To oversee the activities and functions of the International Monetary Fund
   5. To promote stable currency exchange to prevent competitive devaluation
5. Which of the following was NOT an organization in the Bretton Woods system?
   1. The International Monetary Fund
   2. The World Bank
   3. The International Development Association
   4. The World Economic Forum
   5. All of the above were involved in the Bretton Woods system.
6. The US currently holds approximately what percentage of the voting rights within the IMF and World Bank?
   1. 2 per cent
   2. 6 per cent
   3. 17 per cent
   4. 35 per cent
   5. 68 per cent
7. Within the World Bank, how are board representatives chosen?
   1. Through a committee
   2. Through vote shares
   3. Through the “one state, one vote” rule
   4. Through the Office of the Director
   5. Through a lottery
8. What is the name of the organization within the World Bank responsible for providing interest-free loans with long repayment periods for developing countries?
   1. International Development Association
   2. International Monetary Fund
   3. World Poverty Foundation
   4. Global Institute for Poverty Reduction
   5. International Aid Committee
9. What was the initial function of the International Monetary Fund (IMF)?
   1. To provide economic restructuring plans
   2. To invest in economies in the Global South
   3. To design large-scale capital investment projects
   4. To help solve balance of payment problems
   5. To seek to address trade imbalances
10. In 1971, how did the United States effectively abolish the original Bretton Woods system?
    1. By abandoning the floating exchange rate system in favour of a fixed rate of exchange
    2. By suspending the convertibility of US dollars to gold
    3. By effectively pulling the United States out of the UN Security Council
    4. By suspending American payments to the UN
    5. By annulling commitments to regulate structural adjustment policies
11. Which of the following statements is NOT true of Robert McNamara’s tenure as the president of the World Bank?
    1. The Bank’s operations were greatly expanded.
    2. Bank lending was used to fund industrialization projects rather than agricultural reform.
    3. The Bank was used as a tool to fight communism.
    4. Bank lending shifted from large-scale infrastructural projects to anti-poverty projects.
    5. The Bank’s approach became known as the “basic needs” approach.
12. Which of the following goals were included in the “basic needs” approach advocated by Robert McNamara?
    1. Nutrition, housing, health, literacy, and employment
    2. FDI, industrialization, cash crops
    3. Large scale development and infrastructure projects
    4. Institutional management, bottom-up planning, and joint decision making
    5. Debt reduction, equitable income distribution, and participatory budgeting
13. Which country was the first to threaten default on an outstanding debt?
    1. Brazil
    2. Chile
    3. India
    4. Mexico
    5. Ethiopia
14. Which term refers to the program of rapid price liberalization, currency devaluation, and fiscal discipline imposed by the IMF during structural adjustment?
    1. Capitalist medicine
    2. Neoliberal treatment
    3. Deregulation program
    4. Massive attack
    5. Shock therapy
15. Which of the following was NOT a factor that prompted a rethinking by the World Bank and IMF of their policies?
    1. The “East Asian miracle”
    2. The Mexican peso crisis
    3. Stagnation in sub-Saharan Africa
    4. The end of the Cold War and the communist threat
    5. All of the above were factors.
16. ____________ refers to reforms aimed at tackling corruption, the rule of law, transparency, accountability, and judicial independence.
    1. Good governance
    2. Best practices
    3. Efficiency model
    4. Developmental state
    5. Liberalization
17. What did the immediate phase of structural adjustment programs consist of?
    1. Liberalization
    2. Austerity measures
    3. Deflationary policies
    4. Nationalization
    5. Good governance
18. In regards to development, in the early 2000s the World Bank moved to which of the following?
    1. A singular agenda
    2. A strategic agenda
    3. A malleable agenda
    4. A compassionate agenda
    5. A comprehensive agenda
19. What are foreign portfolio investments?
    1. Investments that include the purchase of foreign debt, loans, and stock market investments
    2. Investments that include the purchase of factories and other fixed investment
    3. Investments that may be subject to international tax and trade treaties
    4. Investments that contribute to economic and social stability
    5. Investments that involve dealing in fine art and other luxury goods
20. Which of the following replaced structural adjustment policies, and were designed to introduce national ownership and civil society participation into the creation of development policies?
    1. Authentic Development Protocols
    2. Declarations of Autonomous Development
    3. Bilateral Lending Frameworks
    4. Multilateral Aid Packages
    5. Poverty Reduction Strategy Papers
21. Which best defines “crony capitalism”?
    1. Tight integration of economic, political, and military elites
    2. Generational political leadership
    3. Triangular decision making between banks, MNCs, and particular political parties
    4. An overly close relationship between the government and local businesses
    5. Nationally owned enterprises used for political versus economic goals
22. The World Bank policy has promoted the concept of ____________ as the “missing link” in development theory that identifies networks and linkages an individual or a household can use to gain access to resources.
    1. free trade
    2. ethical markets
    3. social capital
    4. community councils
    5. participatory budgeting frameworks
23. By 2007, which middle-income country was the only major borrower from the IMF?
    1. Brazil
    2. Turkey
    3. China
    4. Argentina
    5. South Korea
24. Why have international financial institutions received criticism?
    1. Because they hold annual meetings
    2. Because their policies are contradictory
    3. Because their policies prevent poverty
    4. Because their policies ensure global stability
    5. Because their policies increase poverty
25. What is the main criticism against international financial institutions from conservatism?
    1. The power of the multinational corporations.
    2. Their relevant role in a globalized world.
    3. The changes in their roles.
    4. The role of the Bretton Woods Conference.
    5. The war between the IMF and the World Bank.
26. Why are structural adjustments controversial?
    1. They are necessary to promote economic growth.
    2. They fight poverty efficiently.
    3. They failed to deliver on their primary promises of stable growth and poverty reduction.
    4. They were not enough.
    5. They helped preserve colonialism.
27. What were the original objectives of the US delegation during the Bretton Woods Conference?
    1. Overwhelming economic and military power
    2. A system of relatively unrestricted world trade
    3. The Bretton Woods System
    4. The lack of a clear consensus
    5. European power restitutions
28. How was the first version of the World Bank affected by the US Marshall Plan?
    1. The Marshall Plan began to provide credit directly to European nations affected by World War II.
    2. The original IBRD changed its name to the World Bank.
    3. European countries preferred to borrow money from the World Bank.
    4. Since the reconstruction of Europe by the Marshall Plan, European countries could not ask for money.
    5. None of the above
29. How did the IBRD interact with new post-colonial nations?
    1. It served as an intermediary between the international financial institutions.
    2. It served as an intermediary between international banks and governments.
    3. It served as an intermediary between governments.
    4. It served as an intermediary between international powers and European governments.
    5. It served as a direct link between the US foreign policy agencies and governments.
30. How did the IMF first use its resources?
    1. To finance mobile communication grids
    2. To finance decolonization
    3. To finance all kinds of projects
    4. To help the US expansion programs
    5. To finance the building of physical infrastructure
31. What was the difference between IBRD and IDA?
    1. The kind of credits they offer to specific groups of countries.
    2. Nothing, they were actually the same kind of institutions.
    3. IDA intended to establish a clear separation between IMF and the World Bank.
    4. IDA concentrated in infrastructure projects.
    5. IDA was set up by Japan.

True or False Questions

The IMF originally functioned as an instrument to maintain international currency stability.

Like the UN, each country has one vote at the World Bank and IMF.

In the first two decades of its existence, the World Bank focused mostly on small, anti-poverty projects.

The US appoints the World Bank president, while Europe selects the president of the IMF.

Under Robert McNamara, the World Bank’s approach to development became known as the “basic needs” approach.

The Washington Consensus is the term used to refer to a set of development policies that recognize the limitations of neoliberalism.

Structural adjustment programs improved social conditions in sub-Saharan Africa in the 1980s and 1990s.

Good governance implies the promotion of transparency and accountability.

The Mexican Peso crisis followed an apparent “boom” in the country’s economy in the late 1980s and early 1990s.

In the early 2000s, the World Bank moved to a more “comprehensive” approach to development.

The international financial institutions dissuade developing countries from accepting “foreign portfolio investments.”

In the 1990s, the IMF discouraged developing countries from opening up their stock markets to foreign investors.

The countries that were least affected by the East Asian financial crisis were those with the least capital account liberalization.

Current voting rights in the IFIs have been adapted to recognize the rising importance of the G20 states.

The Poverty Reduction Strategy Papers formalize a clear division of labour between the World Bank and the IMF.

The Asian Infrastructure Investment Bank represents a response from China to the continued Western influence over the IFIs.

“Vulnerability” and “voicelessness” are now of primary focus in the World Bank’s strategies on poverty reduction.

The World Bank has recognized and become a key player in combatting climate change.

In 2005, Argentina argued Latin American states should sever links with the IMF.

The World Bank now suggests that it needs to “empower” the poor.

The 2008 financial crisis sparked a food crisis in the Global South.

The World Bank now seeks to “empower” the poor by encouraging the fostering of trade unions and encouraging wealth redistribution.

Many countries in the Global South do not possess large-scale deficit financing to prop up consumption and alleviate unemployment.

The global economic crisis of 2008 provided an opportunity for both the IMF and the World Bank to reinvent and reassert their roles.

The post-2008 IMF continued to give countries in the Global South constraining targets for budget deficits and monetary policies.

In the World Bank, the 2008 crisis precipitated a new emphasis on building “resilience” in borrower countries.

The World Bank’s Africa Climate Business Plan is an example of structural adjustments.

The World Bank solely invests money in clean-energy projects, as a way to combat climate change.

China has repeatedly sought to use development funding as a means to open markets and exercise leverage across the post-colonial world, particularly in sub-Saharan Africa and Central Asia.

IFIs entered the new millennium by re-emphasizing their role as global poverty alleviators.

Poverty reduction is not a major focus for the IMF and World Bank.

Short Answer Questions

1. What was the initial function of the IMF?
2. What was the initial function of the World Bank?
3. Discuss reasons for the establishment of the International Development Agency within the International Bank of Reconstruction and Development in 1960.
4. Describe the governance structures of the IMF and the World Bank.
5. What changes did Robert McNamara make when he became president of the World Bank in 1968?
6. Explain the 1980s debt crisis and the response of the IMF and the World Bank.
7. What role did the “East Asian miracle” play in triggering a rethink of IMF and World Bank policies?
8. In its 2001 report, what “lessons” did the World Bank claim to have learned about the successes and failures of structural adjustment programs?
9. What was the “Mexican peso crisis” and how did it affect views on structural adjustment programs?
10. What criticisms have been levelled against the World Bank’s notion of “good governance”?
11. How is the World Bank’s new approach to development more “comprehensive”?
12. What are Poverty Reduction Strategy Papers and what are some criticisms made against them?
13. Discuss the World Bank’s recent turn toward promoting “empowerment.”
14. How has the global financial crisis of 2008 hurt developing economies?
15. How has the 2008 financial crisis generated change in the IFIs?
16. How has the World Bank approached climate change?
17. Why is the Asian Infrastructure Investment Bank significant?
18. How did Argentina’s President Kirchner respond when paying back the IMF in 2005?
19. How does the World Bank conceive of poverty?
20. Explain the World Bank’s idea of “social capital” as the “missing link” in poverty reduction.
21. Why did the World Bank take a new emphasis on resilience after the 2008 financial crisis?
22. Were structural adjustments effective in sub-Saharan Africa?

Essay Questions

1. Explain the shift of the IMF and World Bank’s shift to Poverty Reduction Strategy Papers (PRSPs)?
2. How did the 2008 financial crisis impact the IFIs?
3. Define and explain the significance of the East Asian “miracle,” the Mexican peso crisis, and stagnation in sub-Saharan Africa.
4. Explain the different approaches taken by the World Bank in relation to poverty.
5. How did the IMF and the World Bank regain momentum after the global financial crisis of 2008?