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

How many countries are in the EMU as of January 1, 2017?

Accepted Answer

A)  9 
B)  15 
C)  17 
D)  19 
E)  25 
A)  9 
B)  15 
C)  17 
D)  19 
E)  25

Question 3

A major economic

Accepted Answer

A)  benefit of fixed exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do floating rates. 
B)  benefit of floating exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do fixed rates. 
C)  cost of fixed exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do currency board rates. 
D)  benefit of flexible exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do crawling peg rates. 
E)  benefit of fixed exchange rates is that the value of goods will remain constant across a large region of consumers. 
A)  benefit of fixed exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do floating rates. 
B)  benefit of floating exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do fixed rates. 
C)  cost of fixed exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do currency board rates. 
D)  benefit of flexible exchange rates is that they simplify economic calculations and provide a more predictable basis for decisions that involve international transactions than do crawling peg rates. 
E)  benefit of fixed exchange rates is that the value of goods will remain constant across a large region of consumers.

Question 4

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 5

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 6

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 7

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 8

When did the UK decide to adopt the Euro?

Accepted Answer

A)  1999 
B)  2001 
C)  2008 
D)  The UK has not adopted the Euro. 
E)  2010 
A)  1999 
B)  2001 
C)  2008 
D)  The UK has not adopted the Euro. 
E)  2010

Question 9

Which one of the following statements is TRUE?

Accepted Answer

A)  A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods. 
B)  A flexible exchange rate does not automatically cushion the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods. 
C)  A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods. 
D)  A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods. 
E)  A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods. 
A)  A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods. 
B)  A flexible exchange rate does not automatically cushion the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods. 
C)  A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods. 
D)  A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods. 
E)  A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.

Question 10

Is the United States in danger of a sovereign default because, like countries in the euro zone, it has high current account deficits and levels of public debt?

Accepted Answer

No. The United States has a central bank

Question 11

Explain the credibility theory of the EMS.

Accepted Answer

In this way, the other EMS countries in

Question 12

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 a 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 a fixed rate. 
E)  a flexible exchange rate is not as effective as a fixed exchange rate.

Question 13

Explain the theory of optimum currency areas.

Accepted Answer

The theory implies that countries will w

Question 14

What is fiscal federalism?

Accepted Answer

Fiscal federalism in the euro

Question 15

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 16

The level of fiscal federalism in the European Union is

Accepted Answer

A)  too big to cushion member countries from adverse economic events. 
B)  too small to cushion member countries from adverse economic events. 
C)  appropriate to cushion member countries from adverse economic events. 
D)  too big relative to the one in the U.S. 
E)  similar in its level to that of the U.S. 
A)  too big to cushion member countries from adverse economic events. 
B)  too small to cushion member countries from adverse economic events. 
C)  appropriate to cushion member countries from adverse economic events. 
D)  too big relative to the one in the U.S. 
E)  similar in its level to that of the U.S.

Question 17

An inflation-prone country

Accepted Answer

A)  gains from vesting its monetary policy decisions with a "conservative" central bank. 
B)  loses from vesting its monetary policy decisions with a "conservative" central bank. 
C)  gains from vesting its fiscal policy decisions with a "conservative" central bank. 
D)  loses from vesting its fiscal policy decisions with a "conservative" central bank. 
E)  remains constant when vesting its fiscal policy decisions with a "conservative" central bank. 
A)  gains from vesting its monetary policy decisions with a "conservative" central bank. 
B)  loses from vesting its monetary policy decisions with a "conservative" central bank. 
C)  gains from vesting its fiscal policy decisions with a "conservative" central bank. 
D)  loses from vesting its fiscal policy decisions with a "conservative" central bank. 
E)  remains constant when vesting its fiscal policy decisions with a "conservative" central bank.

Question 18

The efficiency

Accepted Answer

A)  gain from a fixed exchange rate with the euro is smaller when trade between say, Norway and the euro zone, is extensive than when it is small. 
B)  gain from a fixed exchange rate with euro is greater when trade between say, Norway and the euro zone, is extensive than when it is small. 
C)  loss from a fixed exchange rate with the euro is smaller when trade between say, Norway and the euro zone, is extensive than when it is small. 
D)  gain from a fixed exchange rate with euro is the same as when trade between say, Norway and the euro zone, is extensive than when it is small. 
E)  gain from a fixed exchange rate with euro is the same as when trade between say, Norway and the euro zone, is small than when it is small. 
A)  gain from a fixed exchange rate with the euro is smaller when trade between say, Norway and the euro zone, is extensive than when it is small. 
B)  gain from a fixed exchange rate with euro is greater when trade between say, Norway and the euro zone, is extensive than when it is small. 
C)  loss from a fixed exchange rate with the euro is smaller when trade between say, Norway and the euro zone, is extensive than when it is small. 
D)  gain from a fixed exchange rate with euro is the same as when trade between say, Norway and the euro zone, is extensive than when it is small. 
E)  gain from a fixed exchange rate with euro is the same as when trade between say, Norway and the euro zone, is small than when it is small.

Question 19

How much trade do currency unions create?

Accepted Answer

The main result is that currency unions

Exam 21: Optimum Currency Areas and the Euro

The birth of the Euro

How many countries are in the EMU as of January 1, 2017?

A major economic

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

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.

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.

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

When did the UK decide to adopt the Euro?

Which one of the following statements is TRUE?

Is the United States in danger of a sovereign default because, like countries in the euro zone, it has high current account deficits and levels of public debt?

Explain the credibility theory of the EMS.

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

Explain the theory of optimum currency areas.

What is fiscal federalism?

A krone/euro peg alone is

The level of fiscal federalism in the European Union is

An inflation-prone country

The efficiency

How much trade do currency unions create?

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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