Question 1

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 2

Explain what the GG-LL model tells us about the benefits of extensive trade between EU member states and comment on the significance of similarity of economic structure in this framework.

Accepted Answer

The GG-LL model shows that extensive tra

Question 3

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 4

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 5

Under ERM 2 rules,the national central bank of an EU member with its own currency can suspend euro intervention operations

Accepted Answer

A) if there is a civil war. 
B) if they result in money supply changes that threaten to destabilize the domestic price level. 
C) if there is a current account deficit. 
D) if there is a current account surplus. 
E) if they result in a weakened current account. 
A) if there is a civil war. 
B) if they result in money supply changes that threaten to destabilize the domestic price level. 
C) if there is a current account deficit. 
D) if there is a current account surplus. 
E) if they result in a weakened current account.

Question 6

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

Accepted Answer

The SSM involved granting the

Question 7

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 8

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

Accepted Answer

Europe is not an optimum currency area.L

Question 9

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 10

Is Europe an optimum currency area?

Accepted Answer

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

Question 11

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 12

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 13

How did the European single currency evolve?

Accepted Answer

The answer is related to the c

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

Explain why 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.

Accepted Answer

The main reason is through diversificati

Question 16

What is the purpose of the following figure?

Accepted Answer

The purpose of the figure is to show the

Question 17

Explain the credibility theory of the EMS.

Accepted Answer

In this way,the other EMS countries in e

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

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 20

After Norway unilaterally pegs the krone to the euro,domestic money market disturbances will

Accepted Answer

A) no longer affect domestic output despite the continuation of float-rate regime against non-euro currencies. 
B) now have major effect on domestic output despite the continuation of float-rate regime against non-euro currencies. 
C) have some effect on domestic output despite the continuation of float-rate regime against non-euro currencies. 
D) have major effect on domestic employment despite the continuation of float-rate regime against non-euro currencies. 
E) no longer affect foreign imports despite the continuation of float-rate regime against non-euro currencies. 
A) no longer affect domestic output despite the continuation of float-rate regime against non-euro currencies. 
B) now have major effect on domestic output despite the continuation of float-rate regime against non-euro currencies. 
C) have some effect on domestic output despite the continuation of float-rate regime against non-euro currencies. 
D) have major effect on domestic employment despite the continuation of float-rate regime against non-euro currencies. 
E) no longer affect foreign imports despite the continuation of float-rate regime against non-euro currencies.

Exam 21: Optimum Currency Areas and the Euro

Which of the following best defines an optimum currency area?

Explain what the GG-LL model tells us about the benefits of extensive trade between EU member states and comment on the significance of similarity of economic structure in this framework.

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

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?

Under ERM 2 rules,the national central bank of an EU member with its own currency can suspend euro intervention operations

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

Which one of the following statements is TRUE?

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

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

Is Europe an optimum currency area?

Which of the following statements is MOST accurate?

Which of the following statements is MOST accurate?

How did the European single currency evolve?

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

Explain why 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.

What is the purpose of the following figure?

Explain the credibility theory of the EMS.

A key barrier to labor mobility within Europe is

The 1991 Maastricht Treaty can be best described as

After Norway unilaterally pegs the krone to the euro,domestic money market disturbances will

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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