European Monetary Union Design Weaknesses Quiz
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Questions and Answers

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?

    <p>Robust mechanisms</p> Signup and view all the answers

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

    <p>Similar movements among Member States</p> Signup and view all the answers

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

    <p>Crisis resolution clause</p> Signup and view all the answers

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

    <p>Countries are allowed to default, and no one will step in to save them.</p> Signup and view all the answers

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

    <p>There is little accountability and a tendency to favor technocratic measures.</p> Signup and view all the answers

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

    <p>Strict focus only on price stability, neglecting growth and financial stability.</p> Signup and view all the answers

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

    <p>Germany worried about inflation due to the centralized monetary policy.</p> Signup and view all the answers

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

    <p>SGP violations were common, and it was often not applied during crises.</p> Signup and view all the answers

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

    <p>Eurogroup makes most decisions, leading to a lack of federal political power.</p> Signup and view all the answers

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

    <p>To reduce variability in exchange rates and achieve monetary stability</p> Signup and view all the answers

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

    <p>To establish a common unit of account for Central Banks and accounting activities</p> Signup and view all the answers

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

    <p>Delors Report</p> Signup and view all the answers

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

    <p>Anchor currency of the EMS</p> Signup and view all the answers

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

    <p>Managed gold and dollar deposits from Central Banks</p> 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?

    <p>Lack of inclusivity in decision-making processes</p> Signup and view all the answers

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