Question 1

Which of the following statements is TRUE?

Accepted Answer

A) The 1957 Treaty of Rome founded the EU and created a custom union. 
B) The 1957 Treaty of Rome founded the EU. 
C) The 1957 Treaty of Rome founded the euro. 
D) The 1957 Treaty of Rome founded the European Central Bank. 
E) The 1957 Treaty of Rome founded the Stability and Growth Pact.known as SGP. 
A) The 1957 Treaty of Rome founded the EU and created a custom union. 
B) The 1957 Treaty of Rome founded the EU. 
C) The 1957 Treaty of Rome founded the euro. 
D) The 1957 Treaty of Rome founded the European Central Bank. 
E) The 1957 Treaty of Rome founded the Stability and Growth Pact.known as SGP.

Question 2

What is the "doom loop" responsible for the rapid development and severity of the 2009 euro crisis?

Accepted Answer

The "doom loop" refers to the feedback l

Question 3

What are the biggest advantages the U.S.has over the EU in terms of being an Optimum Currency Area?

Accepted Answer

A) low mobility of labor,higher labor productivity,lower level of intra-regional trade 
B) high unionization of U.S.Labor force 
C) high mobility of labor force,more transfer payments between regions 
D) higher uniformity of population's taste in consumption 
E) more specialized labor force and natural resource advantages 
A) low mobility of labor,higher labor productivity,lower level of intra-regional trade 
B) high unionization of U.S.Labor force 
C) high mobility of labor force,more transfer payments between regions 
D) higher uniformity of population's taste in consumption 
E) more specialized labor force and natural resource advantages

Question 4

To join the EMU,a country must have

Accepted Answer

A) a public-sector deficit no higher than 3 percent of its GDP in general. 
B) a public-sector deficit no higher than 2 percent of its GDP in general. 
C) a public-sector deficit no higher than 1 percent of its GDP in general. 
D) a zero public-sector deficit. 
E) a public-sector deficit no higher than 4 percent of its GDP in general. 
A) a public-sector deficit no higher than 3 percent of its GDP in general. 
B) a public-sector deficit no higher than 2 percent of its GDP in general. 
C) a public-sector deficit no higher than 1 percent of its GDP in general. 
D) a zero public-sector deficit. 
E) a public-sector deficit no higher than 4 percent of its GDP in general.

Question 5

When the exchange rate is

Accepted Answer

A) flexible,purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment. 
B) fixed,purposeful stabilization is less difficult because monetary policy has no power at all to affect domestic output and employment. 
C) fixed,purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment. 
D) a crawling peg,rather than fixed,purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment. 
E) fixed rather than crawling peg purposeful stabilization is more difficult because fiscal policy has no power at all to affect domestic output and employment. 
A) flexible,purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment. 
B) fixed,purposeful stabilization is less difficult because monetary policy has no power at all to affect domestic output and employment. 
C) fixed,purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment. 
D) a crawling peg,rather than fixed,purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment. 
E) fixed rather than crawling peg purposeful stabilization is more difficult because fiscal policy has no power at all to affect domestic output and employment.

Question 6

Fiscal federalism in the EU refers to

Accepted Answer

A) one nation's control of the monetary policy of all the other nations. 
B) freedom of member countries to leave the EU at any time. 
C) the transfer of economic resources from members with healthy economies to those suffering economic setbacks. 
D) one nation's freedom to abandon the Euro and use its own currency. 
E) the transfer of economic resources between members with healthy economies. 
A) one nation's control of the monetary policy of all the other nations. 
B) freedom of member countries to leave the EU at any time. 
C) the transfer of economic resources from members with healthy economies to those suffering economic setbacks. 
D) one nation's freedom to abandon the Euro and use its own currency. 
E) the transfer of economic resources between members with healthy economies.

Question 7

Discuss the problems that the EMU will continue to experience in the coming years.

Accepted Answer

(1)Europe is not an optimum currency are

Question 8

Which of the following statements is MOST accurate?

Accepted Answer

A) A rise in the size and frequency of country-specific disturbances to the joining country's product markets raises the critical level of economic integration at which the exchange rate area is joined. 
B) A rise in the size and frequency of country-specific disturbances to the joining country's product markets lowers the critical level of economic integration at which the exchange rate area is joined. 
C) A decline in the size and frequency of country-specific disturbances to the joining country's product markets raises the critical level of economic integration at which the exchange rate area is joined. 
D) A rise in the size and frequency of country-specific disturbances to the joining country's product markets has no effect on the critical level of economic integration at which the exchange rate area is joined. 
E) A decline in the size and frequency of country-specific disturbances to the joining country's product markets does not affect the level of economic integration at which the exchange rate area is joined. 
A) A rise in the size and frequency of country-specific disturbances to the joining country's product markets raises the critical level of economic integration at which the exchange rate area is joined. 
B) A rise in the size and frequency of country-specific disturbances to the joining country's product markets lowers the critical level of economic integration at which the exchange rate area is joined. 
C) A decline in the size and frequency of country-specific disturbances to the joining country's product markets raises the critical level of economic integration at which the exchange rate area is joined. 
D) A rise in the size and frequency of country-specific disturbances to the joining country's product markets has no effect on the critical level of economic integration at which the exchange rate area is joined. 
E) A decline in the size and frequency of country-specific disturbances to the joining country's product markets does not affect the level of economic integration at which the exchange rate area is joined.

Question 9

Explain why the European Union's current combination of rapid capital migration with limited labor migration may actually raise the cost of adjusting to product market shocks without exchange rate change?

Accepted Answer

If the Netherlands suffers an unfavorabl

Question 10

How do constraints on monetary policy in the United States differ from those experienced by euro zone countries?

Accepted Answer

United States monetary policy constraint

Question 11

The credibility theory of the EMS implies in effect that the political costs of violating international exchange rate agreements

Accepted Answer

A) cannot restrain governments from depreciating their currency to gain the short-term advantage of an economic boom at the long-term cost of higher inflation. 
B) can restrain governments from depreciating their currency to gain the short-term advantage of an economic boom at the long-term cost of higher inflation. 
C) cannot restrain governments from depreciating their currency in the short run. 
D) cannot restrain governments from depreciating their currency in the long run. 
E) cannot restrain governments from depreciating their currency to gain the long-term advantage of an economic boom. 
A) cannot restrain governments from depreciating their currency to gain the short-term advantage of an economic boom at the long-term cost of higher inflation. 
B) can restrain governments from depreciating their currency to gain the short-term advantage of an economic boom at the long-term cost of higher inflation. 
C) cannot restrain governments from depreciating their currency in the short run. 
D) cannot restrain governments from depreciating their currency in the long run. 
E) cannot restrain governments from depreciating their currency to gain the long-term advantage of an economic boom.

Question 12

The European Economic and Monetary Union

Accepted Answer

A) set up a single currency and sole bank for European economic monetary policy. 
B) eliminated all barriers to trade such as tax differentials between borders. 
C) produced a single government for handling European affairs. 
D) created the Common Agricultural Pact. 
E) eliminated all local currencies in Western Europe. 
A) set up a single currency and sole bank for European economic monetary policy. 
B) eliminated all barriers to trade such as tax differentials between borders. 
C) produced a single government for handling European affairs. 
D) created the Common Agricultural Pact. 
E) eliminated all local currencies in Western Europe.

Question 13

The monetary efficiency

Accepted Answer

A) loss from pegging the Norwegian krone to the euro (for example)will be higher if factors of production can migrate freely between Norway and the euro area. 
B) gain from pegging the Norwegian krone to the euro (for example)will be lower if factors of production can migrate freely between Norway and the euro area. 
C) gain from pegging the Norwegian krone to the euro (for example)will be higher if factors of production can not migrate freely between Norway and the euro area. 
D) gain from pegging say the Norwegian krone to the euro (for example)will be higher if factors of production can migrate freely between Norway and the euro area. 
E) gain or loss from pegging the Norwegian krone to the Euro cannot be predicted using the available information. 
A) loss from pegging the Norwegian krone to the euro (for example)will be higher if factors of production can migrate freely between Norway and the euro area. 
B) gain from pegging the Norwegian krone to the euro (for example)will be lower if factors of production can migrate freely between Norway and the euro area. 
C) gain from pegging the Norwegian krone to the euro (for example)will be higher if factors of production can not migrate freely between Norway and the euro area. 
D) gain from pegging say the Norwegian krone to the euro (for example)will be higher if factors of production can migrate freely between Norway and the euro area. 
E) gain or loss from pegging the Norwegian krone to the Euro cannot be predicted using the available information.

Question 14

Draw the graph of the GG and LL schedules and explain the logic behind the slopes of each of the schedules.

Accepted Answer

The correct graph has "degree of economi

Question 15

Which one of the following countries was the "spark" that ignited the 2009 euro crisis?

Accepted Answer

A) China 
B) Greece 
C) England 
D) Spain 
E) Germany 
A) China 
B) Greece 
C) England 
D) Spain 
E) Germany

Question 16

A recent study by Andrew Rose of the University of California showed that,on average,two countries that are members of the same currency union

Accepted Answer

A) trade three times as much with each other as countries that do not share a currency. 
B) trade twenty times as much with each other as countries that do not share a currency. 
C) trade ten times as much with each other as countries that do not share a currency. 
D) trade six times as much with each other as countries that do not share a currency. 
E) trade twice as much with each other as countries that do not share a currency. 
A) trade three times as much with each other as countries that do not share a currency. 
B) trade twenty times as much with each other as countries that do not share a currency. 
C) trade ten times as much with each other as countries that do not share a currency. 
D) trade six times as much with each other as countries that do not share a currency. 
E) trade twice as much with each other as countries that do not share a currency.

Question 17

The European Central Bank has its headquarter in

Accepted Answer

A) London. 
B) Berlin. 
C) Frankfurt. 
D) Paris. 
E) Brussels. 
A) London. 
B) Berlin. 
C) Frankfurt. 
D) Paris. 
E) Brussels.

Question 18

Explain why it may make sense for the United States,Japan,and Europe to allow their mutual exchange rate to float?

Accepted Answer

Even though these regions trad

Question 19

Is Europe an optimum currency area?

Accepted Answer

An open question.I think yes,the area's

Question 20

Shortly after their admission into the EMU,Ireland and the Netherlands

Accepted Answer

A) both seceded from the EMU. 
B) were expelled due to high levels of debt. 
C) breached the inflation convergence criterion that had qualified them for admission to the EMU in the first place. 
D) achieved inflation rates of zero percent. 
E) abandoned the Euro as their national currency. 
A) both seceded from the EMU. 
B) were expelled due to high levels of debt. 
C) breached the inflation convergence criterion that had qualified them for admission to the EMU in the first place. 
D) achieved inflation rates of zero percent. 
E) abandoned the Euro as their national currency.

Exam 21: Optimum Currency Areas and the Euro

Which of the following statements is TRUE?

What is the "doom loop" responsible for the rapid development and severity of the 2009 euro crisis?

What are the biggest advantages the U.S.has over the EU in terms of being an Optimum Currency Area?

To join the EMU,a country must have

When the exchange rate is

Fiscal federalism in the EU refers to

Discuss the problems that the EMU will continue to experience in the coming years.

Which of the following statements is MOST accurate?

Explain why the European Union's current combination of rapid capital migration with limited labor migration may actually raise the cost of adjusting to product market shocks without exchange rate change?

How do constraints on monetary policy in the United States differ from those experienced by euro zone countries?

The credibility theory of the EMS implies in effect that the political costs of violating international exchange rate agreements

The European Economic and Monetary Union

The monetary efficiency

Draw the graph of the GG and LL schedules and explain the logic behind the slopes of each of the schedules.

Which one of the following countries was the "spark" that ignited the 2009 euro crisis?

A recent study by Andrew Rose of the University of California showed that,on average,two countries that are members of the same currency union

The European Central Bank has its headquarter in

Explain why it may make sense for the United States,Japan,and Europe to allow their mutual exchange rate to float?

Is Europe an optimum currency area?

Shortly after their admission into the EMU,Ireland and the Netherlands

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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