Question 1

What behavior by central and private banks in euro zone countries created the conditions for the 2009 euro crisis?

Accepted Answer

Assets were accumulated by the banks thr

Question 2

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

Accepted Answer

Europe is not an optimum currency area.

Question 3

Describe the single supervisory mechanism or SSM proposed by EU leaders in June of 2012.

Accepted Answer

The SSM involved granting the

Question 4

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

Accepted Answer

(1) Europe is not an optimum currency ar

Question 5

The German central bank in the European Monetary System, 1979-1998

Accepted Answer

A)  was very inflation-averse. 
B)  was moderately inflation-averse. 
C)  was willing to accept inflation. 
D)  lacked control over inflation since it had fixed its exchange rate. 
E)  lacked sufficient reserves. 
A)  was very inflation-averse. 
B)  was moderately inflation-averse. 
C)  was willing to accept inflation. 
D)  lacked control over inflation since it had fixed its exchange rate. 
E)  lacked sufficient reserves.

Question 6

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 7

Which of the following is TRUE?

Accepted Answer

A)  All European countries are part of the EMU. 
B)  All Western European countries are part of the EMU. 
C)  Originally, 20 countries joined the EMU on January 1999. 
D)  No Western European countries are part of the EMU. 
E)  Not all Western European countries are part of the EMU. 
A)  All European countries are part of the EMU. 
B)  All Western European countries are part of the EMU. 
C)  Originally, 20 countries joined the EMU on January 1999. 
D)  No Western European countries are part of the EMU. 
E)  Not all Western European countries are part of the EMU.

Question 8

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 9

The intersection of GG and LL determines

Accepted Answer

A)  the optimal level of integration desired by Norway. 
B)  the maximum integration level desired by Norway. 
C)  the minimum level of integration that will cause Norway to join the fixed exchange rate regime. 
D)  the maximum level of integration that will cause Norway to join the fixed exchange rate regime. 
E)  the maximum level of integration that can aid Norway if it joins the fixed exchange rate regime. 
A)  the optimal level of integration desired by Norway. 
B)  the maximum integration level desired by Norway. 
C)  the minimum level of integration that will cause Norway to join the fixed exchange rate regime. 
D)  the maximum level of integration that will cause Norway to join the fixed exchange rate regime. 
E)  the maximum level of integration that can aid Norway if it joins the fixed exchange rate regime.

Question 10

The most important feature of the Single European Act of 1986, which amended the founding Treaty of Rome, was dropping the requirement of

Accepted Answer

A)  unanimous consent for measures related to market completion and making it a decision that only Germany and France agreed about. 
B)  unanimous consent for measures related to market completion. 
C)  majority consent for measures related to market completion and making it a decision that only Germany and France agreed about. 
D)  unanimous consent for measures related to agricultural policies only. 
E)  unanimous consent for measures related only to fiscal policies. 
A)  unanimous consent for measures related to market completion and making it a decision that only Germany and France agreed about. 
B)  unanimous consent for measures related to market completion. 
C)  majority consent for measures related to market completion and making it a decision that only Germany and France agreed about. 
D)  unanimous consent for measures related to agricultural policies only. 
E)  unanimous consent for measures related only to fiscal policies.

Question 11

Using the GG-LL framework, analyze the effect of Libya subsidizing the Pakistani Nuclear programs.

Accepted Answer

This will shift the GG curve u

Question 12

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 13

Since Norway has close trading links with the euro zone

Accepted Answer

A)  a small reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is large relative to Norway's output. Thus, full employment can be restored fairly quickly. 
B)  a small reduction in its price will lead to a decrease in euro zone demand for Norwegian goods that is large relative to Norway's output. Thus, full employment can be restored fairly quickly. 
C)  a small reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is small relative to Norway's output. Thus, full employment can be restored fairly quickly. 
D)  a big reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is large relative to Norway's output. Thus, full employment can be restored fairly quickly. 
E)  a big reduction in its price will lead to a decrease in euro zone demand for Norwegian goods that is small relative to Norway's output. Thus, full employment can be restored fairly quickly. 
A)  a small reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is large relative to Norway's output. Thus, full employment can be restored fairly quickly. 
B)  a small reduction in its price will lead to a decrease in euro zone demand for Norwegian goods that is large relative to Norway's output. Thus, full employment can be restored fairly quickly. 
C)  a small reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is small relative to Norway's output. Thus, full employment can be restored fairly quickly. 
D)  a big reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is large relative to Norway's output. Thus, full employment can be restored fairly quickly. 
E)  a big reduction in its price will lead to a decrease in euro zone demand for Norwegian goods that is small relative to Norway's output. Thus, full employment can be restored fairly quickly.

Question 14

Which one of the following statements is TRUE for Norway, a non-euro country?

Accepted Answer

A)  Of course, owners of capital that cannot be moved cannot avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows. 
B)  Even owners of capital that cannot be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows. 
C)  Owners of capital that cannot be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is closed to capital flows. 
D)  Even owners of capital that can be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is closed to capital flows. 
E)  Only owners of capital that can be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows. 
A)  Of course, owners of capital that cannot be moved cannot avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows. 
B)  Even owners of capital that cannot be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows. 
C)  Owners of capital that cannot be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is closed to capital flows. 
D)  Even owners of capital that can be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is closed to capital flows. 
E)  Only owners of capital that can be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows.

Question 15

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 16

The result of the reunification of eastern and western Germany in 1990

Accepted Answer

A)  was a boom in Germany and higher inflation, with no effect on nearby countries. 
B)  was a recession in Germany and lower inflation, with no effect on nearby countries. 
C)  was a boom in Germany and higher inflation, and, with other EMS countries' commitment to fixed exchange rates, a deep recession in nearby countries. 
D)  was a recession in Germany and lower inflation, and, with other EMS countries' commitment to fixed exchange rates, a deep recession in nearby countries. 
E)  was a recession in Germany and lower inflation, causing a boom in nearby countries. 
A)  was a boom in Germany and higher inflation, with no effect on nearby countries. 
B)  was a recession in Germany and lower inflation, with no effect on nearby countries. 
C)  was a boom in Germany and higher inflation, and, with other EMS countries' commitment to fixed exchange rates, a deep recession in nearby countries. 
D)  was a recession in Germany and lower inflation, and, with other EMS countries' commitment to fixed exchange rates, a deep recession in nearby countries. 
E)  was a recession in Germany and lower inflation, causing a boom in nearby countries.

Question 17

Compared with inter-regional trade in the he United States, intra-EU trade

Accepted Answer

A)  is far greater. 
B)  is greater. 
C)  is about the same. 
D)  is less. 
E)  is far less. 
A)  is far greater. 
B)  is greater. 
C)  is about the same. 
D)  is less. 
E)  is far less.

Question 18

Explain why the EMS countries decided to fix their exchange rates against the German DM.

Accepted Answer

In this way, the other EMS cou

Question 19

The EMU created a currency area with more than

Accepted Answer

A)  200 million consumers. 
B)  250 million consumers. 
C)  about a billion. 
D)  500 million consumers. 
E)  300 million consumers. 
A)  200 million consumers. 
B)  250 million consumers. 
C)  about a billion. 
D)  500 million consumers. 
E)  300 million consumers.

Question 20

What is one way to offset the economic stability loss due to fixed exchange rates?

Accepted Answer

Fiscal federalism is one solution in whi

Exam 21: Optimum Currency Areas and the Euro

What behavior by central and private banks in euro zone countries created the conditions for the 2009 euro crisis?

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

Describe the single supervisory mechanism or SSM proposed by EU leaders in June of 2012.

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

The German central bank in the European Monetary System, 1979-1998

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

Which of the following is TRUE?

Which of the following statements is MOST accurate?

The intersection of GG and LL determines

The most important feature of the Single European Act of 1986, which amended the founding Treaty of Rome, was dropping the requirement of

Using the GG-LL framework, analyze the effect of Libya subsidizing the Pakistani Nuclear programs.

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

Since Norway has close trading links with the euro zone

Which one of the following statements is TRUE for Norway, a non-euro country?

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.

The result of the reunification of eastern and western Germany in 1990

Compared with inter-regional trade in the he United States, intra-EU trade

Explain why the EMS countries decided to fix their exchange rates against the German DM.

The EMU created a currency area with more than

What is one way to offset the economic stability loss due to fixed exchange rates?

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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