Question 1

The 1991 Maastricht Treaty can be best described as

Accepted Answer

A) a peace treaty between Europe and the United States. 
B) an agreement for the accession of the Netherlands into the EU. 
C) an agreement for the creation of a free trade area. 
D) a provision for the introduction of a single European currency and European central bank. 
E) the beginning of a floating exchange rate European monetary system. 
A) a peace treaty between Europe and the United States. 
B) an agreement for the accession of the Netherlands into the EU. 
C) an agreement for the creation of a free trade area. 
D) a provision for the introduction of a single European currency and European central bank. 
E) the beginning of a floating exchange rate European monetary system.

Question 2

Is the EU an optimum currency area? Why or why not?

Accepted Answer

Europe is not an optimum currency area.L

Question 3

What is the "three-pronged approach" to organizing a banking union?

Accepted Answer

Centralize financial supervisi

Question 4

During the 2009 euro crisis,a number of countries had private banks that had become too "big to save." Explain.

Accepted Answer

A private bank is too big to save if the

Question 5

Describe the effects of the reunification of eastern and western Germany in 1990 on both Germany and its neighboring European countries using the AA-DD framework.

Accepted Answer

As for Germany a period of boom with hig

Question 6

The credibility theory of EMS had as an effect

Accepted Answer

A) the inflation rates of member countries converging to the low German levels,a result that was not matched by similar countries who did not fix their exchange rates. 
B) the inflation rates of member countries failing to converge to the low German levels. 
C) the inflation rates of member countries converging to the low German levels,but other countries including U.S.and Britain also reduced inflation in this time period without fixing exchange rates. 
D) the inflation rate in Germany rose to match the inflation rates of other member countries. 
E) the inflation rate in the U.S.dropped to the low German levels. 
A) the inflation rates of member countries converging to the low German levels,a result that was not matched by similar countries who did not fix their exchange rates. 
B) the inflation rates of member countries failing to converge to the low German levels. 
C) the inflation rates of member countries converging to the low German levels,but other countries including U.S.and Britain also reduced inflation in this time period without fixing exchange rates. 
D) the inflation rate in Germany rose to match the inflation rates of other member countries. 
E) the inflation rate in the U.S.dropped to the low German levels.

Question 7

Explain why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies,it is unable to keep at least some monetary independence.

Accepted Answer

Any independent money supply change in N

Question 8

Discuss the benefits and costs of joining a fixed-exchange area.

Accepted Answer

Benefits: In general,gains from the stab

Question 9

Explain the credibility theory of the EMS.

Accepted Answer

In this way,the other EMS countries in e

Question 10

Explain why after,say Norway unilaterally pegs the krone to the euro,domestic money market disturbances will no longer affect domestic output despite the continuation of float-rate regime against non-euro currencies.

Accepted Answer

Because Norway's interest rate must equa

Question 11

When the economy is disturbed by a change in the output market

Accepted Answer

A) a fixed exchange rate has an advantage over a flexible rate. 
B) a floating exchange rate has an advantage over a fixed rate. 
C) a crawling peg exchange rate has an advantage over a flexible rate. 
D) a floating exchange rate has the same effect as fixed rate. 
E) a flexible exchange rate is not as effective as a fixed exchange rate. 
A) a fixed exchange rate has an advantage over a flexible rate. 
B) a floating exchange rate has an advantage over a fixed rate. 
C) a crawling peg exchange rate has an advantage over a flexible rate. 
D) a floating exchange rate has the same effect as fixed rate. 
E) a flexible exchange rate is not as effective as a fixed exchange rate.

Question 12

When Norway unilaterally fixes its exchange rate against the euro and leaves the krone

Accepted Answer

A) free to float against the non-euro currencies,it is able to keep at least some monetary independence. 
B) free to float against the non-euro currencies,it is unable to keep at least some monetary independence. 
C) free to float against the non-euro currencies,it is able to keep its monetary independence. 
D) run by crawling peg against the non-euro currencies,it is able to keep at least some monetary independence. 
E) fixed against the non-euro currencies,it is unable to keep its monetary independence. 
A) free to float against the non-euro currencies,it is able to keep at least some monetary independence. 
B) free to float against the non-euro currencies,it is unable to keep at least some monetary independence. 
C) free to float against the non-euro currencies,it is able to keep its monetary independence. 
D) run by crawling peg against the non-euro currencies,it is able to keep at least some monetary independence. 
E) fixed against the non-euro currencies,it is unable to keep its monetary independence.

Question 13

How much trade do currency unions create?

Accepted Answer

The main result is that currency unions

Question 14

Describe the policy of "outright monetary transactions" or 0MT presented by the president of the European Central Bank in 2012.

Accepted Answer

The ECB is now committed to pu

Question 15

"Given that labor remains relatively immobile within Europe,the European Union's success in liberalizing its capital flows may have worked perversely to worsen the economic stability loss due to the process of monetary unification." Discuss.

Accepted Answer

Probably right.This is another example o

Question 16

Which of the following statements is MOST accurate?

Accepted Answer

A) A low degree of economic integration between a country and the fixed exchange rate area that it joins reduces the resulting economic stability loss due to output market disturbances. 
B) A high degree of economic integration between a country and the fixed exchange rate area that it joins reduces the resulting economic stability loss due to output market disturbances. 
C) A high degree of economic integration between a country and the fixed exchange rate area that it joins increases the resulting economic stability loss due to output market disturbances. 
D) A complete lack of economic integration between a country and the fixed exchange rate area that it joins reduces the resulting economic stability loss due to output market disturbances. 
E) A low degree of economic integration between a country and the fixed exchange rate area that it joins increases the resulting economic stability loss due to output market disturbances. 
A) A low degree of economic integration between a country and the fixed exchange rate area that it joins reduces the resulting economic stability loss due to output market disturbances. 
B) A high degree of economic integration between a country and the fixed exchange rate area that it joins reduces the resulting economic stability loss due to output market disturbances. 
C) A high degree of economic integration between a country and the fixed exchange rate area that it joins increases the resulting economic stability loss due to output market disturbances. 
D) A complete lack of economic integration between a country and the fixed exchange rate area that it joins reduces the resulting economic stability loss due to output market disturbances. 
E) A low degree of economic integration between a country and the fixed exchange rate area that it joins increases the resulting economic stability loss due to output market disturbances.

Question 17

Which one of the following statements is TRUE?

Accepted Answer

A) The less extensive are cross-border trade and factor movements,the greater is the gain from a fixed cross-border exchange rate. 
B) The more extensive are cross-border trade and factor movements,the greater is the loss from a fixed cross-border exchange rate. 
C) The more extensive are cross-border trade and factor movements,the greater is the gain from a fixed cross-border exchange rate. 
D) The more extensive are cross-border trade,the greater is the loss from a fixed cross-border exchange rate. 
E) The more extensive are factor movements,the greater is the loss from a fixed cross-border exchange rate. 
A) The less extensive are cross-border trade and factor movements,the greater is the gain from a fixed cross-border exchange rate. 
B) The more extensive are cross-border trade and factor movements,the greater is the loss from a fixed cross-border exchange rate. 
C) The more extensive are cross-border trade and factor movements,the greater is the gain from a fixed cross-border exchange rate. 
D) The more extensive are cross-border trade,the greater is the loss from a fixed cross-border exchange rate. 
E) The more extensive are factor movements,the greater is the loss from a fixed cross-border exchange rate.

Question 18

A key barrier to labor mobility within Europe is

Accepted Answer

A) the laziness of Germans. 
B) full employment in most European countries. 
C) differences in language and culture. 
D) lack of transportation. 
E) the physical barriers in the landscape. 
A) the laziness of Germans. 
B) full employment in most European countries. 
C) differences in language and culture. 
D) lack of transportation. 
E) the physical barriers in the landscape.

Question 19

To join the EMU,a country must have a public debt below or approaching a reference level of

Accepted Answer

A) 50 percent of its GDP. 
B) 10 percent of its GDP. 
C) 60 percent of its GDP. 
D) 100 percent of its GDP. 
E) 5 percent of its GDP. 
A) 50 percent of its GDP. 
B) 10 percent of its GDP. 
C) 60 percent of its GDP. 
D) 100 percent of its GDP. 
E) 5 percent of its GDP.

Question 20

A good measure of a country's level of economic integration with a currency area is

Accepted Answer

A) the intersection of DD and GG. 
B) the country's price level. 
C) the compatibility of economic policies. 
D) the intersection of AA and GG. 
E) the extent of trade between the joining country and the currency area and the ease with which labor and capital can migrate between the joining country and the currency area. 
A) the intersection of DD and GG. 
B) the country's price level. 
C) the compatibility of economic policies. 
D) the intersection of AA and GG. 
E) the extent of trade between the joining country and the currency area and the ease with which labor and capital can migrate between the joining country and the currency area.

Exam 21: Optimum Currency Areas and the Euro

The 1991 Maastricht Treaty can be best described as

Is the EU an optimum currency area? Why or why not?

What is the "three-pronged approach" to organizing a banking union?

During the 2009 euro crisis,a number of countries had private banks that had become too "big to save." Explain.

Describe the effects of the reunification of eastern and western Germany in 1990 on both Germany and its neighboring European countries using the AA-DD framework.

The credibility theory of EMS had as an effect

Explain why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies,it is unable to keep at least some monetary independence.

Discuss the benefits and costs of joining a fixed-exchange area.

Explain the credibility theory of the EMS.

Explain why after,say Norway unilaterally pegs the krone to the euro,domestic money market disturbances will no longer affect domestic output despite the continuation of float-rate regime against non-euro currencies.

When the economy is disturbed by a change in the output market

When Norway unilaterally fixes its exchange rate against the euro and leaves the krone

How much trade do currency unions create?

Describe the policy of "outright monetary transactions" or 0MT presented by the president of the European Central Bank in 2012.

"Given that labor remains relatively immobile within Europe,the European Union's success in liberalizing its capital flows may have worked perversely to worsen the economic stability loss due to the process of monetary unification." Discuss.

Which of the following statements is MOST accurate?

Which one of the following statements is TRUE?

A key barrier to labor mobility within Europe is

To join the EMU,a country must have a public debt below or approaching a reference level of

A good measure of a country's level of economic integration with a currency area is

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Money,Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: An Historical Overview

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

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