Question 1

The birth of the Euro

Accepted Answer

A)  resulted in fixed exchange rates between all EMU member countries. 
B)  resulted in flexible exchange rates between all EMU member countries. 
C)  resulted in crawling-peg exchange rates between all EMU member countries. 
D)  resulted in non currency board exchange rates between all EMU member countries. 
E)  resulted in floating exchange rates between all EMU member countries. 
A)  resulted in fixed exchange rates between all EMU member countries. 
B)  resulted in flexible exchange rates between all EMU member countries. 
C)  resulted in crawling-peg exchange rates between all EMU member countries. 
D)  resulted in non currency board exchange rates between all EMU member countries. 
E)  resulted in floating exchange rates between all EMU member countries.

Question 2

A krone/euro peg alone is

Accepted Answer

A)  not enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule. 
B)  enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule. 
C)  not enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule, provided fiscal policy will be used as well. 
D)  enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule, provided the government runs a budget deficit. 
E)  enough to provide partial stability in the face of smaller monetary shocks that shift the AA schedule. 
A)  not enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule. 
B)  enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule. 
C)  not enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule, provided fiscal policy will be used as well. 
D)  enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule, provided the government runs a budget deficit. 
E)  enough to provide partial stability in the face of smaller monetary shocks that shift the AA schedule.

Question 3

Which of the following best defines an optimum currency area?

Accepted Answer

A)  a group of nations sharing the same currency 
B)  a group of regions in close proximity to each other. 
C)  a group of regions who operate under similar economic policies. 
D)  a group of regions with economies closely linked by factor mobility and by trade in goods and services 
E)  a group of nations that engage in free trade with each other 
A)  a group of nations sharing the same currency 
B)  a group of regions in close proximity to each other. 
C)  a group of regions who operate under similar economic policies. 
D)  a group of regions with economies closely linked by factor mobility and by trade in goods and services 
E)  a group of nations that engage in free trade with each other

Question 4

What are the biggest advantages the U.S. has above 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 5

How and why did Europe set up its single currency?

Accepted Answer

The why part is because large fluctuatio

Question 6

Why does the LL schedule have a negative slope?

Accepted Answer

A)  The economic stability loss from pegging to the area's currencies rises as the degree of economic interdependence rises. 
B)  The economic stability loss from pegging to the area's currencies falls as the degree of economic interdependence rises. 
C)  The economic stability loss from pegging to the area's currencies falls as the degree of economic interdependence falls. 
D)  The economic stability loss from pegging to the area's currencies rises as the degree of economic activity increases. 
E)  The economic stability loss from pegging to the area's currencies is constant, even as the degree of economic activity increases. 
A)  The economic stability loss from pegging to the area's currencies rises as the degree of economic interdependence rises. 
B)  The economic stability loss from pegging to the area's currencies falls as the degree of economic interdependence rises. 
C)  The economic stability loss from pegging to the area's currencies falls as the degree of economic interdependence falls. 
D)  The economic stability loss from pegging to the area's currencies rises as the degree of economic activity increases. 
E)  The economic stability loss from pegging to the area's currencies is constant, even as the degree of economic activity increases.

Question 7

Explain what was the credibility theory of the EMS.

Accepted Answer

In this way, the other EMS countries in

Question 8

Explain the theory of optimum currency areas.

Accepted Answer

The theory implies that countries will w

Question 9

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 10

Did the 1957 Treaty of Rome turn the EU into a truly unified market?

Accepted Answer

A)  Yes, it paved the way for the current EMU. 
B)  No, although it established a customs union, it failed to remove barriers to the movement of goods and factors within Europe. 
C)  No, it was only after the German unification and locating the ECB in Frankfurt that unity was achieved. 
D)  No, since the Northern members of the EU had larger endowments of capital and skilled labor. 
E)  No, the Treaty of Rome created more trade barriers between European countries. 
A)  Yes, it paved the way for the current EMU. 
B)  No, although it established a customs union, it failed to remove barriers to the movement of goods and factors within Europe. 
C)  No, it was only after the German unification and locating the ECB in Frankfurt that unity was achieved. 
D)  No, since the Northern members of the EU had larger endowments of capital and skilled labor. 
E)  No, the Treaty of Rome created more trade barriers between European countries.

Question 11

The ability of factors to migrate abroad

Accepted Answer

A)  reduces the severity of unemployment and the fall in the rate of return available to investors. 
B)  increases the severity of unemployment and the fall in the rate of return available to investors. 
C)  reduces the severity of unemployment but increases the fall in the rate of return available to investors. 
D)  cannot change the severity of unemployment and the constant rate of return available to investors. 
E)  reduces the migration of highly-skilled workers. 
A)  reduces the severity of unemployment and the fall in the rate of return available to investors. 
B)  increases the severity of unemployment and the fall in the rate of return available to investors. 
C)  reduces the severity of unemployment but increases the fall in the rate of return available to investors. 
D)  cannot change the severity of unemployment and the constant rate of return available to investors. 
E)  reduces the migration of highly-skilled workers.

Question 12

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 13

The main function of the 1997 Stability and Growth Pact (SGP) was to

Accepted Answer

A)  exclude a highly indebted EMU country 
B)  enhance cooperation between France and Germany. 
C)  make the Euro a weak currency. 
D)  distribute the Euro banknote among European central banks and to create a timetable for the imposition of financial penalties on countries that fail to correct situations of "excessive" deficits and debt promptly enough. 
E)  determine specialized penalties for each member nation. 
A)  exclude a highly indebted EMU country 
B)  enhance cooperation between France and Germany. 
C)  make the Euro a weak currency. 
D)  distribute the Euro banknote among European central banks and to create a timetable for the imposition of financial penalties on countries that fail to correct situations of "excessive" deficits and debt promptly enough. 
E)  determine specialized penalties for each member nation.

Question 14

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 15

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.

The birth of the Euro

A krone/euro peg alone is

Which of the following best defines an optimum currency area?

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

How and why did Europe set up its single currency?

Why does the LL schedule have a negative slope?

Explain what was the credibility theory of the EMS.

Explain the theory of optimum currency areas.

Which of the following statements is most accurate?

Did the 1957 Treaty of Rome turn the EU into a truly unified market?

The ability of factors to migrate abroad

When the exchange rate is

The main function of the 1997 Stability and Growth Pact (SGP) was to

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

A key barrier to labor mobility within Europe 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

Filters

Exam 20: Optimum Currency Areas and the European Experience

The birth of the Euro

A krone/euro peg alone is

Which of the following best defines an optimum currency area?

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

How and why did Europe set up its single currency?

Why does the LL schedule have a negative slope?

Explain what was the credibility theory of the EMS.

Explain the theory of optimum currency areas.

Which of the following statements is most accurate?

Did the 1957 Treaty of Rome turn the EU into a truly unified market?

The ability of factors to migrate abroad

When the exchange rate is

The main function of the 1997 Stability and Growth Pact (SGP) was to

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

A key barrier to labor mobility within Europe 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

Filters