Question :
11) After Norway unilaterally pegs the krone to the euro, : 1303720
11) After Norway unilaterally pegs the krone to the euro, domestic money market disturbances will
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.
12) A krone/euro peg alone is
A) not enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule.
B) enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule.
C) not enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule, provided fiscal policy will be used as well.
D) enough to provide automatic stability in the face of any monetary shocks that shift the AA schedule, provided the government runs a budget deficit.
E) enough to provide partial stability in the face of smaller monetary shocks that shift the AA schedule.
13) Since Norway has close trading links with the euro zone
A) a small reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is large relative to Norway’s output. Thus, full employment can be restored fairly quickly.
B) a small reduction in its price will lead to a decrease in euro zone demand for Norwegian goods that is large relative to Norway’s output. Thus, full employment can be restored fairly quickly.
C) a small reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is small relative to Norway’s output. Thus, full employment can be restored fairly quickly.
D) a big reduction in its price will lead to an increase in euro zone demand for Norwegian goods that is large relative to Norway’s output. Thus, full employment can be restored fairly quickly.
E) a big reduction in its price will lead to a decrease in euro zone demand for Norwegian goods that is small relative to Norway’s output. Thus, full employment can be restored fairly quickly.
14) If Norway’s labor and capital markets are highly correlated with those of its euro zone neighbors
A) unemployed workers can easily move abroad to find work and domestic capital can be shifted to more profitable uses in other countries.
B) unemployed workers cannot easily move abroad to find work and domestic capital cannot be shifted to more profitable uses in other countries.
C) while unemployed workers can easily move abroad to find work, domestic capital cannot be shifted to more profitable uses in other countries.
D) while capital can easily move abroad to be put to a more profitable use, unemployed workers cannot easily move abroad to find work.
E) unemployment will rise, thanks to competition from foreign labor.
15) The ability of factors to migrate abroad
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.
16) Which one of the following statements is TRUE for Norway, a non-euro country?
A) Of course, owners of capital that cannot be moved cannot avoid more of the economic stability loss due to fixed exchange rates when Norway’s economy is open to capital flows.
B) 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.
C) 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 closed to capital flows.
D) Even owners of capital that can be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway’s economy is closed to capital flows.
E) Only owners of capital that can be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway’s economy is open to capital flows.
17) The intersection of GG and LL determines
A) the optimal level of integration desired by Norway.
B) the maximum integration level desired by Norway.
C) the minimum level of integration that will cause Norway to join the fixed exchange rate regime.
D) the maximum level of integration that will cause Norway to join the fixed exchange rate regime.
E) the maximum level of integration that can aid Norway if it joins the fixed exchange rate regime.
18) The level of fiscal federalism in the European Union is
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.
19) A good measure of a country’s level of economic integration with a currency area is
A) the intersection of DD and GG.
B) the country’s price level.
C) the compatibility of economic policies.
D) the intersection of AA and GG.
E) the extent of trade between the joining country and the currency area and the ease with which labor and capital can migrate between the joining country and the currency area.
20) A key barrier to labor mobility within Europe is
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.
