Advocates of flexible exchange rates claim that under flexible exchange rates
A) enhanced control over fiscal policy would allow countries to dismantle their distorting barriers to international payments.
B) reduced control over monetary policy would allow countries to dismantle their distorting barriers to international payments.
C) enhanced control over monetary policy would allow countries to increase their distorting barriers to international payments.
D) enhanced control over monetary policy would allow countries to dismantle their distorting barriers to international payments.
E) enhanced control over monetary policy would destabilize exchange rates.
Question 2 - Advocates of flexible exchange rates claim that under flexible exchange rates, the central bank of
A) an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort.
B) a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort.
C) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort.
D) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort.
E) an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort.
Question 3 - 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.
Question 4 - 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.
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