Question :
21.1 How the European Single Currency Evolved
1) The European Economic : 1303713
21.1 How the European Single Currency Evolved
1) The European Economic and Monetary Union
A) set up a single currency and sole bank for European economic monetary policy.
B) eliminated all barriers to trade such as tax differentials between borders.
C) produced a single government for handling European affairs.
D) created the Common Agricultural Pact.
E) eliminated all local currencies in Western Europe.
2) The birth of the Euro
A) resulted in fixed exchange rates between all EMU member countries.
B) resulted in flexible exchange rates between all EMU member countries.
C) resulted in crawling-peg exchange rates between all EMU member countries.
D) resulted in non currency board exchange rates between all EMU member countries.
E) resulted in floating exchange rates between all EMU member countries.
3) Which of the following is TRUE?
A) All European countries are part of the EMU.
B) All Western European countries are part of the EMU.
C) Originally, 20 countries joined the EMU on January 1999.
D) No Western European countries are part of the EMU.
E) Not all Western European countries are part of the EMU.
4) The EMU created a currency area with more than
A) 200 million consumers.
B) 250 million consumers.
C) about a billion.
D) 500 million consumers.
E) 300 million consumers.
5) The EU countries were prompted to seek closer coordination of monetary policies and greater exchange rate stability in order
A) to enhance Europe’s role in the world monetary system.
B) to turn the European Union into a truly unified market.
C) both to enhance Europe’s role in the world monetary system and to turn the European Union into a truly unified market.
D) both to turn the European Union into a truly unified market and to counter the rise of Japan in international financial markets.
E) to homogenize all European cultures.
6) Which of the following statements is TRUE?
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.
7) The credibility theory of the EMS implies in effect that the political costs of violating international exchange rate agreements
A) cannot restrain governments from depreciating their currency.
B) can restrain governments from depreciating their currency.
C) cannot restrain governments from depreciating their currency in the short run.
D) cannot restrain governments from depreciating their currency in the long run.
E) can control the political policies of member nations.
8) The credibility theory of the EMS implies in effect that the political costs of violating international exchange rate agreements
A) cannot restrain governments from depreciating their currency to gain the short-term advantage of an economic boom at the long-term cost of higher inflation.
B) can restrain governments from depreciating their currency to gain the short-term advantage of an economic boom at the long-term cost of higher inflation.
C) cannot restrain governments from depreciating their currency in the short run.
D) cannot restrain governments from depreciating their currency in the long run.
E) cannot restrain governments from depreciating their currency to gain the long-term advantage of an economic boom.
9) Under the EMS, Germany set the system’s
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.
10) An inflation-prone country
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.
