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1 | |
The EU’s monetary union was agreed in the 1986 Single European Act, but only implemented in the Amsterdam Treaty. |
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| | A) | TRUE |
| | B) | FALSE |
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2 | |
The difference in membership between the European System of Central Banks and the Eurosystems is the national central banks of EU members who have not adopted the euro. |
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| | A) | TRUE |
| | B) | FALSE |
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3 | |
The ‘Convergence Criteria’ for joining the monetary union included: |
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| | A) | a country’s inflation rate should not exceed by more than 1.5 percentage points the average of the three lowest inflation rates achieved by the European Union member countries, and that its long-term interest rate should not exceed the average rates observed in the three lowest inflation rate countries by more than 2 percentage points. |
| | B) | the country must have taken part in the ERM for at least two years without having had to devalue its currency, its public debt should not exceed 60% of its GDP or be moving in that direction, and its government deficit should be less than 3%. |
| | C) | the country’s GDP growth rate should be at less than 50% of the average of the three fastest growing EU members. |
| | D) | All of the above. |
| | E) | All of the above except d. |
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4 | |
The European System of Central Banks (ESCB) is composed of: |
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| | A) | the European Central Bank (ECB) and the national central banks of all EU Member States. |
| | B) | all the organisations mentioned in a. plus the Bank for International Settlements. |
| | C) | all the organisations mentioned in b. plus the IMF. |
| | D) | the 20 European Commissioners. |
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5 | |
The ECB is run by the Governing Council which is made up of: |
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| | A) | an Executive Board of six members, appointed by the heads of states or governments of the countries which have joined the monetary union. |
| | B) | the governors of the national central banks of EU members in the Eurozone. |
| | C) | the President of the EU, and two representatives of the EU Parliament. |
| | D) | all of the above except c. |
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6 | |
The target interest rate for the ECB is the European Over Night Index Average (EONIA), a weighted average of overnight lending transactions in the euro area’s interbank market. The ECB controls this by: |
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| | A) | requiring Eurozone banks to charge the prime clients an interest rate that is no more than plus or minus ½ percent from the target interest rate. |
| | B) | establishing an ‘interest rate ceiling’ by offering to lend euros to banks at a fixed rate, and establishing a ‘interest rate floor’ by offering to borrow euros from banks at a fixed rate that is somewhat lower than the interest rate ceiling. |
| | C) | conducting weekly auctions for reserve deposits that provide liquidity to the banking system. |
| | D) | All of the above. |
| | E) | All of the above except a. |
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7 | |
The first years of the euro have been marked by several shocks, complicating the Eurosystem’s task. Fortunately, these shocks have been _______ and national inflation rates have, on the whole, ________. |
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| | A) | internal, diverged |
| | B) | mild, converged |
| | C) | symmetric, converged |
| | D) | mild, risen |
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8 | |
The ECB is quite independent in two senses: it can define its ________ and it can decide how to conduct ________. |
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| | A) | President, public relations |
| | B) | objectives, monetary policy |
| | C) | President, monetary policy |
| | D) | Board of Governers, voting in the Council |
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9 | |
Monetary union started in 1999; this was 2 years behind schedule. |
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| | A) | TRUE |
| | B) | FALSE |
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10 | |
In 2003 there were 12 members of the monetary union; there were 11 members initially and Greece joined in 2001. |
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| | A) | TRUE |
| | B) | FALSE |
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11 | |
The first Chairman of the Governing Council was Wim Duisenberg; he was replaced by Jean-Claude Trichet. |
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| | A) | TRUE |
| | B) | FALSE |
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12 | |
Interest rate decisions of the ECB are made on the basis of qualified majority voting. |
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| | A) | TRUE |
| | B) | FALSE |