Question 1

To join the EMU, a country must have a public debt below or approaching a reference level of

Accepted Answer

A)  50 percent of its GDP. 
B)  10 percent of its GDP. 
C)  60 percent of its GDP. 
D)  100 percent of its GDP. 
E)  5 percent of its GDP. 
A)  50 percent of its GDP. 
B)  10 percent of its GDP. 
C)  60 percent of its GDP. 
D)  100 percent of its GDP. 
E)  5 percent of its GDP.

Question 2

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 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

The main function of the 1997 Stability and Growth Pact (SGP) was to

Accepted Answer

A)  exclude a highly indebted EMU country 
B)  enhance cooperation between France and Germany. 
C)  tighten the fiscal constraints. 
D)  distribute the Euro banknote among European central banks and to create a timetable for the imposition of financial penalties on countries that fail to correct situations of "excessive" deficits and debt promptly enough. 
E)  determine specialized penalties for each member nation. 
A)  exclude a highly indebted EMU country 
B)  enhance cooperation between France and Germany. 
C)  tighten the fiscal constraints. 
D)  distribute the Euro banknote among European central banks and to create a timetable for the imposition of financial penalties on countries that fail to correct situations of "excessive" deficits and debt promptly enough. 
E)  determine specialized penalties for each member nation.

Question 5

Which one of the following countries was the "spark" that ignited the 2009 euro crisis?

Accepted Answer

A)  China 
B)  Greece 
C)  England 
D)  Spain 
E)  Germany 
A)  China 
B)  Greece 
C)  England 
D)  Spain 
E)  Germany

Question 6

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 7

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 8

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 9

Richard Baldwin's estimate was that the euro increased the trade level of its users by

Accepted Answer

A)  only 5 percent. 
B)  only 9 percent. 
C)  over 30 percent. 
D)  over 50 percent. 
E)  only 12 percent. 
A)  only 5 percent. 
B)  only 9 percent. 
C)  over 30 percent. 
D)  over 50 percent. 
E)  only 12 percent.

Question 10

"The costs and benefits for a country from joining a fixed-exchange rate area such as the EMS depend on how well-integrated its economy is with those of its potential partners." Discuss.

Accepted Answer

We will expand on this idea, which is ro

Question 11

The European Central Bank has its headquarter in

Accepted Answer

A)  London. 
B)  Berlin. 
C)  Frankfurt. 
D)  Paris. 
E)  Brussels. 
A)  London. 
B)  Berlin. 
C)  Frankfurt. 
D)  Paris. 
E)  Brussels.

Question 12

The ability of factors to migrate abroad

Accepted Answer

A)  reduces the severity of unemployment and the fall in the rate of return available to investors. 
B)  increases the severity of unemployment and the fall in the rate of return available to investors. 
C)  reduces the severity of unemployment but increases the fall in the rate of return available to investors. 
D)  cannot change the severity of unemployment and the constant rate of return available to investors. 
E)  reduces the migration of highly-skilled workers. 
A)  reduces the severity of unemployment and the fall in the rate of return available to investors. 
B)  increases the severity of unemployment and the fall in the rate of return available to investors. 
C)  reduces the severity of unemployment but increases the fall in the rate of return available to investors. 
D)  cannot change the severity of unemployment and the constant rate of return available to investors. 
E)  reduces the migration of highly-skilled workers.

Question 13

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 14

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 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 prompted the EU countries to seek closer coordination of monetary policies and greater exchange rate stability in the late 1960s?

Accepted Answer

(1) To enhance Europe's role i

Question 17

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 18

Is Europe an optimum currency area?

Accepted Answer

An open question. I think yes, the area'

Question 19

Under the EMS, Germany set the system's

Accepted Answer

A)  monetary policy while the other European countries pegged their currencies to the DM. 
B)  fiscal policy while the other European countries pegged their currencies to the DM. 
C)  monetary policy while the other European countries kept their currencies fluctuating relative to the DM. 
D)  fiscal policy while the other European countries kept their currencies fluctuating relative to the DM. 
E)  monetary policy, while other European countries maintained their traditional policies. 
A)  monetary policy while the other European countries pegged their currencies to the DM. 
B)  fiscal policy while the other European countries pegged their currencies to the DM. 
C)  monetary policy while the other European countries kept their currencies fluctuating relative to the DM. 
D)  fiscal policy while the other European countries kept their currencies fluctuating relative to the DM. 
E)  monetary policy, while other European countries maintained their traditional policies.

Question 20

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

Exam 21: Optimum Currency Areas and the Euro

To join the EMU, a country must have a public debt below or approaching a reference level of

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

A major economic

The main function of the 1997 Stability and Growth Pact (SGP) was to

Which one of the following countries was the "spark" that ignited the 2009 euro crisis?

An inflation-prone country

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

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

Richard Baldwin's estimate was that the euro increased the trade level of its users by

"The costs and benefits for a country from joining a fixed-exchange rate area such as the EMS depend on how well-integrated its economy is with those of its potential partners." Discuss.

The European Central Bank has its headquarter in

The ability of factors to migrate abroad

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

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 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 prompted the EU countries to seek closer coordination of monetary policies and greater exchange rate stability in the late 1960s?

The efficiency

Is Europe an optimum currency area?

Under the EMS, Germany set the system's

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.

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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