Exam 32: International Economic Policy

What is convergence?

If neither changes in interest rates nor central bank intervention from the reserves can halt a depreciation/appreciation of a currency that is perceived to be not at its equilibrium exchange rate, then which of the following exchange rate regimes are viable over the longer term?

The EMS was an EC arrangement which started in 1979, and aimed to create currency stability, monetary co- operation and the convergence of economic policies. It had what economists call ___ exchange rate mechanism.

The main reason behind the crises in the ERM in September 1992 and July/August 1993 was the lack of convergence of the economies of the ERM members.

Which of the following is not a Eurosceptic argument against the euro?

Exchange rates move partly because economies have not converged. What are the most important differences between countries which will cause changes in the exchange rate?

One lesson which could be learned from the exchange rate crises of the 1990s is that

In 1998 the IMF suggested that a solution to the 1997/8 Asian crises could have been exchange controls as they would have prevented

An optimal currency area is one in which the constituent parts have no need of their own exchange rates and little call for a monetary policy of their own.

A change in UK monetary policy will probably have a similar effect on other countries' national incomes to that on UK national income.

A Tobin tax levied on trading in financial products or on trading in foreign currencies has been suggested as a policy in the UK and Europe. Which of the following statements about the proposed tax is true?

When the US economy expands, assuming no change in US interest rates, this will lead to a contraction in other countries which is approximately equal to the expansion in the US.

One of the criteria for joining the euro was that unemployment should be close to the euro- area norm.

Speculators would move their money out of a country which had a current account ___and a ___ Monetary policy.

The only way to stop speculation against the £ is to join the European single currency.

If two countries have fixed their exchange rates, then they must have similar fiscal policies.

If there were a 50% chance that by this time next week a currency will have depreciated by 20%, then selling the currency now will give an expected return of approximately 10% for the week.

What were the causes of the 1997 south- east Asian crisis?

In 1987 the G7 countries responded to pressure on the dollar caused by US budget and trade deficits by agreeing to what was known as the Louvre Accord. This did not provide for

Identify the problems of using controls over financial flows.