European Integration History Quiz

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Questions and Answers

What was the main focus of the Treaty of Rome signed on March 25 by the six founders?

Establishing a European army

Coordination of economic policy and development (correct)

Creation of a common monetary policy

Implementation of political unification

What event in 1954 marked the end of the European Community of Defense project?

The establishment of a European army

A vote by the EU Parliament against the project (correct)

The signing of the Maastricht Treaty

The signing of the Treaty of Rome

What dilemma is described concerning the European construction from 1957 to 1979?

The transition from national to supranational governance

The establishment of a common currency versus trade agreements

The integration of military and economic strategies

The balance between political cooperation and economic stability (correct)

What was the monetary strategy of the EU's construction characterized by until 1998?

A gradual approach with small steps Signup and view all the answers

Which significant treaty referenced specific timelines for the first time in European monetary integration?

The Maastricht Treaty Signup and view all the answers

What is one primary reason for a country to hold only one currency instead of multiple currencies?

To minimize the transaction costs related to currency exchange Signup and view all the answers

What typically characterizes the short-term economic period in relation to prices?

Prices are sticky or rigid Signup and view all the answers

In the context of currency devaluation pressures, which two scenarios are mentioned?

Poor economic performance and market rumors Signup and view all the answers

What challenge arises from the contradictory internal and external goals of monetary policy?

Imperfect monetary integration Signup and view all the answers

What is one potential consequence if speculative pressure on a currency persists?

A likelihood of currency devaluation Signup and view all the answers

Which factor does not directly determine exchange rates according to macroeconomic considerations?

Cultural influences Signup and view all the answers

What aspect must be considered when implementing a new single currency from two existing currencies?

Political autonomy versus supranational control Signup and view all the answers

What is a function of the unique currency proposed in the context of monetary economics?

To establish a benchmark for value measurement Signup and view all the answers

What was a significant feature of the Marshall Plan introduced in 1947?

It offered conditional financial aid contingent on cooperation between countries. Signup and view all the answers

What event in 1950 marked a significant step towards European integration?

The Declaration of Robert Schuman. Signup and view all the answers

Which of the following institutions was established first in the development of the European Union?

The Council of the EU. Signup and view all the answers

What did Churchill's vision of a 'US of EU' mainly focus on in 1946?

Reconciliation between France and Germany. Signup and view all the answers

Which of the following was a key aspect of the European community of steel and coal established in 1951?

It placed strategic resources under the supervision of a high authority. Signup and view all the answers

What was the focus of the three pillars established in the European Union's construction?

Defense, justice, but lacking economic and currency coordination. Signup and view all the answers

How many yellow stars are featured on the European flag established in 1955?

12 Signup and view all the answers

Which treaty established the Western Union as a defense pillar in relation to NATO?

The Treaty of Brussels. Signup and view all the answers

What characterized the creation of a common market in the EEC?

Introduction of a custom union and free exchange of goods Signup and view all the answers

Which institution of the EEC acts as a supranational authority?

The Commission Signup and view all the answers

What significant agricultural policy was introduced in the EEC?

Common Agricultural Policy (CAP) Signup and view all the answers

What was the outcome of the custom union designed for January 1st, 1968 in the EEC?

It was achieved 18 months in advance. Signup and view all the answers

What role did the Comity of Governors of the Central Bank of member states play?

It was established with consultative powers only. Signup and view all the answers

What key measure was enacted to address monetary policy within the EEC?

Stabilization and exchange rate policies of a common interest Signup and view all the answers

What was a consequence of the British pound devaluation in late 1967?

Speculation leading to a crisis in the gold market Signup and view all the answers

How did the EEC contribute to financial solidarity between member countries?

By facilitating increased trade and economic cooperation Signup and view all the answers

What is the base currency value for 1 ECU as calculated on 12th March 1972?

5.79831 FF Signup and view all the answers

What criteria determine the weight of each currency in the ECU?

GDP share, trade weight, and FECOM contribution Signup and view all the answers

What happens if the weight of a country's contribution changes by 25%?

The definition of the ECU may change every 5 years. Signup and view all the answers

What is the divergence threshold within the EMS mechanism?

75% of the floating band Signup and view all the answers

Which statement is true regarding the pivot rate in the EMS?

A strong country cannot affect a weak country's pivot rate. Signup and view all the answers

What role does the ECU play within the EU?

It serves as the denominator for all operations. Signup and view all the answers

How does the EMS mechanism enhance intervention symmetry compared to previous systems?

By ensuring that a currency reaching its upper band leads to another reaching its lower band. Signup and view all the answers

What is one key characteristic of the ECU in terms of its daily valuation?

It is computed every day and is complex in nature. Signup and view all the answers

What was one objective of the unique currency in Europe?

To display unity in Europe Signup and view all the answers

Which economic factor contributed to the 1992 economic crisis?

Bundesbank's unexpected increase in interest rates Signup and view all the answers

What was a consequence of Finland allowing its currency to float?

It generated a contagion effect on Scandinavian and EMS countries. Signup and view all the answers

How did political factors play a role in the economic crisis?

The Danish 'no' vote created uncertainty about Eurozone integration Signup and view all the answers

What does the incompatibility triangle of Mundel demonstrate?

Monetary autonomy is inconsistent with a single currency in free capital movement. Signup and view all the answers

What was a potential effect of the euro being considered 'an eco weapon'?

It allowed Europe to dominate the global currency market. Signup and view all the answers

Why was stability necessary for the euro as a major trade currency?

To ensure a larger share of world trade flowed through Europe. Signup and view all the answers

What was a result of the high interest rates during the 1992 economic crisis?

Currencies became overvalued. Signup and view all the answers

Study Notes

Introduction to Economics (Course 1)

Economic Expectations: Several types exist, including perfect, adaptive, and rational expectations. Perfect expectations predict the future based on immediate understanding, adaptive expects use past and current info to predict future trends, and rational ones use past, present, and trend data. Self-fulfilling expectations change based on predicted behavior of others.

Introduction about Expectations

Perfect Expectations: A simple prediction of a change in time. Example: Knowing the time will change in one minute from 10:19 to 10:20. Relatable to natural phenomena
Adaptive Expectations: Predictions are based on an average of past and present values. Example: If given €10 in October 2022 and €20 in October 2023, one might expect €15-€18 in October 2024.
Rational Expectations: Predictions using past, present, and trend data. The unexpected and surprising are not predictable.
Self-Fulfilling Expectations: Outcomes are realized because of predicted behavior.

Why the EU?

The European construction was motivated by both political and geopolitical reasons. The primary goal was to end European wars among France, Germany, and the UK. Increased interdependence of western economies was seen as a means to achieve lasting exchanges without conflict.

Why a Single Currency?

The EU project took decades to develop. The goal of a single currency is to reduce transaction costs associated with currency exchange and increase stability amongst member states.

Monetary Integration

Step 1: From Monetary Autonomy to Imperfect Monetary Integration: This phase involved the exchange rate, nominal exchange rate, real exchange rate, and effective exchange rates. Different types of exchange rates are used to measure the relative value of one currency to another. Imports, exports, trade, inflation, and relationships between the aforementioned concepts are considered.
Step 2: Involves Fixed vs. Flexible Exchange Rates. A fixed exchange rate sets a currency's value against another (usually a more stable one). A flexible exchange rate has its value determined by currency market supply and demand.
Inflation (A): Inflation is the increase of consumer prices, whereas GDP deflator considers prices of consumption and investment. The formula for positive inflation is Pt – Py > 0, where Pt = current price and Py = previous price.
Disinflation: A slowing of inflation (e.g., 8% to 5% to 4%).
Remark about Inflation: Inflation focuses on consumer prices, the GDP deflator factors in both consumer and investment prices, and disinflation describes a decrease or slowing of inflation over time.

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Description

Test your knowledge on the key treaties and events that shaped European integration from 1957 to 1998. This quiz covers the Treaty of Rome, the European Community of Defense project, monetary strategies, and the challenges faced in monetary policy. Ideal for students of European history and politics.