Economics of the EU - Class 10

Thelma Dubois
Quiz by Thelma Dubois, updated more than 1 year ago
Thelma Dubois
Created by Thelma Dubois over 3 years ago
4
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Description

Economics Quiz on Economics of the EU - Class 10, created by Thelma Dubois on 04/24/2017.

Resource summary

Question 1

Question
Amongst the following benefits of joining the EMU, which one aim at boosting trade within the union?
Answer
  • Alternative to fixed exchange rates
  • Greater transparency
  • Lower inflation level and variability for periphery countries
  • Reduction of transactions costs
  • Reduction of exchange rates uncertainty
  • Elimination of large exchange rates depreciation

Question 2

Question
The costs of joining a common currency area...
Answer
  • Having a common currency
  • Having a common monetary policy
  • Assymetric shocks
  • Divergence
  • Price and wage stickiness

Question 3

Question
The costs of joining a common currency area...
Answer
  • Having a common currency
  • Having a common monetary policy
  • Assymetric shocks
  • Divergence
  • Price and wage stickiness

Question 4

Question
Mundell was the first economist to consider the case of asymmetric shocks in currency area in 1961.
Answer
  • True
  • False

Question 5

Question
A country suffering a negative asymmetric shock inside a currency area cannot use its exchange rate or its monetary policy to accommodate the demand shock and the common monetary policy cannot accommodate this kind of shocks. Hence adjustment has to go through:
Answer
  • Capital mobility
  • Price and wage flexibility
  • Structural reforms
  • Labour mobility

Question 6

Question
After a negative demand shock, price and wage should decrease so as to make the country more competitive and thus stimulate demand.
Answer
  • True
  • False

Question 7

Question
What is the main risk in case investors fear default in one country of the EMU?
Answer
  • Dragging down other countries of the union
  • Creating a liquidity crisis
  • Having inappropriate monetary policy for all members
  • Fostering cyclical divergence

Question 8

Question
By entering a monetary union, member countries become more vulnerable to movements of distrust by investors.
Answer
  • True
  • False

Question 9

Question
A schematic assessment of the current EMU as an OCA, considering additional criteria presented by economists other than Mundell: The EMU is quite good in terms of [blank_start]economic openness/trade integration[blank_end] (McKinnon 1963) and [blank_start]diversification production/consumption[blank_end] (Kenen 1969). Although it is a condition to enter the EMU, it is lacking [blank_start]similarities of inflation rates[blank_end] (Fleming 1971) and requires further [blank_start]financial market integration[blank_end] (Ingram 1962) which did not work as expected. Finally it is hindered by a very low level of [blank_start]political integration[blank_end] (Mintz 1970) and [blank_start]compatibility in preferences[blank_end] (Tower and Willet 1976) as well as a [blank_start]non-existent fiscal integration[blank_end] (Kenen 1969).
Answer
  • economic openness/trade integration
  • diversification production/consumption
  • similarities of inflation rates
  • financial market integration
  • political integration
  • compatibility in preferences
  • non-existent fiscal integration
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