Question 1

How did the European single currency evolve?

Accepted Answer

The answer is related to the c

Question 2

Which of the following statements is the MOST accurate?

Accepted Answer

A)  Trade of EU countries with other EU countries has increased since the euro was introduced. 
B)  Trade of EU countries with other EU countries has decreased since the euro was introduced. 
C)  Trade of EU countries with other EU countries has increased in some years and decreased in other years since the euro was introduced. 
D)  Trade of EU countries with other EU countries can no longer be measured since both trading parties have the same currency. 
E)  Trade of EU countries with North American countries has decreased since the euro was introduced. 
A)  Trade of EU countries with other EU countries has increased since the euro was introduced. 
B)  Trade of EU countries with other EU countries has decreased since the euro was introduced. 
C)  Trade of EU countries with other EU countries has increased in some years and decreased in other years since the euro was introduced. 
D)  Trade of EU countries with other EU countries can no longer be measured since both trading parties have the same currency. 
E)  Trade of EU countries with North American countries has decreased since the euro was introduced.

Question 3

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 4

Using the GG-LL framework, analyze the effect of an increase in the size and frequency of sudden shifts in the demand for a country's exports.

Accepted Answer

Such a change pushes LL upward and to th

Question 5

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 6

What is fiscal federalism?

Accepted Answer

Fiscal federalism in the euro

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

Which one of the following unexpected events ignited the 2009 euro crisis?

Accepted Answer

A)  accelerating hyperinflation and political upheaval 
B)  the prospect of a sovereign default by one or more euro zone countries 
C)  rising oil prices 
D)  revolutions in Switzerland and Belgium 
E)  a Chinese boycott of European products 
A)  accelerating hyperinflation and political upheaval 
B)  the prospect of a sovereign default by one or more euro zone countries 
C)  rising oil prices 
D)  revolutions in Switzerland and Belgium 
E)  a Chinese boycott of European products

Question 9

Discuss the benefits and costs of joining a fixed-exchange area.

Accepted Answer

Benefits: In general, gains from the sta

Question 10

The monetary efficiency

Accepted Answer

A)  loss from pegging the Norwegian krone to the euro (for example) will be higher if factors of production can migrate freely between Norway and the euro area. 
B)  gain from pegging the Norwegian krone to the euro (for example) will be lower if factors of production can migrate freely between Norway and the euro area. 
C)  gain from pegging the Norwegian krone to the euro (for example) will be higher if factors of production can not migrate freely between Norway and the euro area. 
D)  gain from pegging say the Norwegian krone to the euro (for example) will be higher if factors of production can migrate freely between Norway and the euro area. 
E)  gain or loss from pegging the Norwegian krone to the Euro cannot be predicted using the available information. 
A)  loss from pegging the Norwegian krone to the euro (for example) will be higher if factors of production can migrate freely between Norway and the euro area. 
B)  gain from pegging the Norwegian krone to the euro (for example) will be lower if factors of production can migrate freely between Norway and the euro area. 
C)  gain from pegging the Norwegian krone to the euro (for example) will be higher if factors of production can not migrate freely between Norway and the euro area. 
D)  gain from pegging say the Norwegian krone to the euro (for example) will be higher if factors of production can migrate freely between Norway and the euro area. 
E)  gain or loss from pegging the Norwegian krone to the Euro cannot be predicted using the available information.

Question 11

Fiscal federalism in the EU refers to

Accepted Answer

A)  one nation's control of the monetary policy of all the other nations. 
B)  freedom of member countries to leave the EU at any time. 
C)  the transfer of economic resources from members with healthy economies to those suffering economic setbacks. 
D)  one nation's freedom to abandon the Euro and use its own currency. 
E)  the transfer of economic resources between members with healthy economies. 
A)  one nation's control of the monetary policy of all the other nations. 
B)  freedom of member countries to leave the EU at any time. 
C)  the transfer of economic resources from members with healthy economies to those suffering economic setbacks. 
D)  one nation's freedom to abandon the Euro and use its own currency. 
E)  the transfer of economic resources between members with healthy economies.

Question 12

Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. See also Chapter 19.

Accepted Answer

Using the GG-LL framework will help solv

Question 13

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 14

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 15

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 16

Which of the following statements is TRUE?

Accepted Answer

A)  The 1957 Treaty of Rome founded the EU and created a custom union. 
B)  The 1957 Treaty of Rome founded the EU. 
C)  The 1957 Treaty of Rome founded the euro. 
D)  The 1957 Treaty of Rome founded the European Central Bank. 
E)  The 1957 Treaty of Rome founded the Stability and Growth Pact. known as SGP. 
A)  The 1957 Treaty of Rome founded the EU and created a custom union. 
B)  The 1957 Treaty of Rome founded the EU. 
C)  The 1957 Treaty of Rome founded the euro. 
D)  The 1957 Treaty of Rome founded the European Central Bank. 
E)  The 1957 Treaty of Rome founded the Stability and Growth Pact. known as SGP.

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

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 19

How and why did Europe set up its single currency?

Accepted Answer

The why part is because large fluctuatio

Question 20

To join the EMU, a country should have no more than

Accepted Answer

A)  1.5 percent inflation rate above the average of the three EU member states with the highest inflation. 
B)  3 percent inflation rate above the average of the three EU member states with the lowest inflation. 
C)  4 percent inflation rate above the average of the three EU member states with the lowest inflation. 
D)  1.5 percent inflation rate above the average of the three EU member states with the lowest inflation. 
E)  2 percent inflation rate above the average of the three EU member states with the lowest inflation. 
A)  1.5 percent inflation rate above the average of the three EU member states with the highest inflation. 
B)  3 percent inflation rate above the average of the three EU member states with the lowest inflation. 
C)  4 percent inflation rate above the average of the three EU member states with the lowest inflation. 
D)  1.5 percent inflation rate above the average of the three EU member states with the lowest inflation. 
E)  2 percent inflation rate above the average of the three EU member states with the lowest inflation.

Exam 21: Optimum Currency Areas and the Euro

How did the European single currency evolve?

Which of the following statements is the MOST accurate?

The level of fiscal federalism in the European Union is

Using the GG-LL framework, analyze the effect of an increase in the size and frequency of sudden shifts in the demand for a country's exports.

When did the UK decide to adopt the Euro?

What is fiscal federalism?

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

Which one of the following unexpected events ignited the 2009 euro crisis?

Discuss the benefits and costs of joining a fixed-exchange area.

The monetary efficiency

Fiscal federalism in the EU refers to

Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. See also Chapter 19.

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

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

The 1991 Maastricht Treaty can be best described as

Which of the following statements is TRUE?

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

Which of the following statements is MOST accurate?

How and why did Europe set up its single currency?

To join the EMU, a country should have no more than

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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