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1 | |
The ECU was a basket of all EMS currencies and was designed to be a physical currency to be circulated in all EC countries. It was, however, never adopted by the private markets. |
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| | A) | TRUE |
| | B) | FALSE |
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2 | |
In the first version of the EMS (EMS-1), lasting divergences in inflation without adjustment of the exchange rates were accepted, resulting in competitiveness problems and trade imbalances. |
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| | A) | TRUE |
| | B) | FALSE |
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3 | |
The 1978 EMS agreement was explicitly symmetric, without any central currency. |
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| | A) | TRUE |
| | B) | FALSE |
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4 | |
The EMS-2 system is more flexible and less committal than EMS-1: the margins of fluctuation are less precisely defined and interventions, though still automatic and unlimited, may be suspended by the ECB. |
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| | A) | TRUE |
| | B) | FALSE |
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5 | |
The consensus rule in the ERM stipulated that any change in any bilateral exchange rate had to be jointly decided by all members. |
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| | A) | TRUE |
| | B) | FALSE |
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6 | |
The EMS agreement established two arrangements, the _________ to which all European Community countries were de facto members and the ________, an optional scheme. |
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| | A) | European Monetary Union (EMU), EMS-2 |
| | B) | European Monetary System (EMS), Exchange Rate Mechanism (ERM) |
| | C) | European Currency Unit (ECU), Exchange Rate Mechanims (ERM) |
| | D) | EMS-2, European Currency Unit (ECU) |
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7 | |
Because of _________ and chronic _________ for high inflation countries, all EMS members decided to adopt the _______ as an anchor and thus avoid further realignments. |
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| | A) | high inflation, trade deficits, DM |
| | B) | high unemployment, current account deficits, 'franc fort' |
| | C) | high inflation, external deficits, 'franc fort' |
| | D) | speculative crises, external deficits, DM |
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8 | |
While EMS-1 was a symmetric system based on a grid of bilateral parities, in the EMS-2 the parities were defined vis a vis _________. |
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| | A) | the US$ |
| | B) | a basket of currencies |
| | C) | the Euro |
| | D) | the DM |
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9 | |
When and by whom was the decision taken to create the EMS? |
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10 | |
What precondition for joining the EMU is set by the Maastricht Treaty? |
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11 | |
The adoption of the euro in January 1999 was accompanied by the launch of which instrument? |
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12 | |
The ERM’s parity grid was |
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| | A) | a flexible Exchange Rate arrangement between all EMS countries, with the Deutschmark as the anchor currency. |
| | B) | a basket of currencies of all EMS countries. |
| | C) | a matrix like table collecting all pair wise central parities and their associated margins of fluctuation. |
| | D) | a totally symmetric exchange rate arrangement where all ERM currencies were fixed to each other with a flexible band of fluctuation of plus or minus 20%. |
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13 | |
The impossible trinity principle holds that the flowing three characteristics cannot be maintained simultaneously: |
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| | A) | a fixed exchange rate, monetary independence and full capital mobility. |
| | B) | high productivity, free capital movement and monetary independence. |
| | C) | free trade, free capital movement and low inflation. |
| | D) | low interest rates, low unemployment and tight monetary policies. |
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14 | |
The crisis of 1993 was onset by: |
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| | A) | an ongoing loss of competitiveness for high inflation countries, german unification and slow global growth. |
| | B) | the oil price rise shock. |
| | C) | war in the Middle East. |
| | D) | devaluation of the US$. |
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15 | |
The mutual support principle central to the EMS agreements stipulated that: |
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| | A) | bilateral exhcange rates had to be jointly decided by all members. |
| | B) | countries shared equally the responsability to maintain each bilateral exchange rate within its margin. |
| | C) | strong currencies should intervene on the foreign exchange market to support weaker currencies. |
| | D) | central banks should bargain with member states to realign currencies within the agreed upon margins. |