European Monetary Union Design Weaknesses Quiz

Play an AI-generated podcast conversation about this lesson

What aspect of macroeconomic imbalances was mainly emphasized in the design of EMU and SGP?

Private-level imbalances
Public finance imbalances (correct)
Structural imbalances
Trade imbalances

What was a notable absence in the coordination of national economic policies in the Eurozone?

Crisis resolution clause (correct)
Soft instruments for addressing macroeconomic imbalances
Focus on private-sector behavior
Sufficient flexibility to correct differences in economic performances

According to Robert Mundell's theory, what is a necessary condition for sharing a common currency?

Sufficient flexibility in currency valuation
High mobility of production factors
Soft mechanisms for addressing imbalances
Diversified economies (correct)

What did the Eurozone lack in terms of addressing macroeconomic imbalances and structural adjustments?

Robust mechanisms (C) Signup and view all the answers

Which factor would help reduce the risk of asymmetric shocks according to the Theory of Optimal Currency Areas?

Similar movements among Member States (A) Signup and view all the answers

What was a significant absence in the European Semester inclusivity according to the text?

Crisis resolution clause (B) Signup and view all the answers

What does the no bail out rule in the Stability and Growth Pact (SGP) mean?

Countries are allowed to default, and no one will step in to save them. (B) Signup and view all the answers

What is a weakness of the Economic and Monetary Union (EMU) design mentioned in the text?

There is little accountability and a tendency to favor technocratic measures. (A) Signup and view all the answers

What is a key feature of the European Central Bank's (ECB) mandate within the EMU?

Strict focus only on price stability, neglecting growth and financial stability. (A) Signup and view all the answers

Why were there German fears for inflation and transfer union in relation to the EMU?

Germany worried about inflation due to the centralized monetary policy. (A) Signup and view all the answers

What was a common issue regarding the observance of the Stability and Growth Pact (SGP) during crises?

SGP violations were common, and it was often not applied during crises. (D) Signup and view all the answers

What describes the democratic gap within the Economic and Monetary Union (EMU) according to the text?

Eurogroup makes most decisions, leading to a lack of federal political power. (B) Signup and view all the answers

What is the main goal of the European Exchange Rate Mechanism (ERM)?

To reduce variability in exchange rates and achieve monetary stability (A) Signup and view all the answers

What was the European Currency Unit (ECU) primarily used for?

To establish a common unit of account for Central Banks and accounting activities (C) Signup and view all the answers

Which report outlined three main stages to achieve the Economic and Monetary Union (EMU)?

Delors Report (B) Signup and view all the answers

What role did the Deutsche Mark play in the EMS that led to dissatisfaction among other Member States?

Anchor currency of the EMS (A) Signup and view all the answers

Which of the following accurately describes the European Fund for Monetary Cooperation?

Managed gold and dollar deposits from Central Banks (A) Signup and view all the answers

What was one of the main criticisms regarding the EMS prior to its evolution into the European Monetary Institute?

Lack of inclusivity in decision-making processes (C) Signup and view all the answers