Ch 14 Econ 360

4) The European Union became an economic union with the implementation of which treaty?A) Treaty of RomeB) Single Europe Treaty C) Delor's AgreementD) Treaty on European UnionE) Schengen Agreement

Answer: D

1) The first and biggest problem the EU faces in its expansion to the east isA) the reform of its agricultural subsidy programs.B) the lack of democracy in the countries that are most likely to become members.C) the unwillingness of the new members to adopt EU rules.D) the lack of market economies in the countries that are most likely to become members.E) the unwillingness of citizens in the new member countries to migrate to higher income countries.

Answer: A

1) With the full implementation of the Single European Act, the EU became aA) common market.B) free trade area.C) customs union.D) economic union.E) None of the above.

Answer: A

2) The European Union membership criteria includes all of the following EXCEPTA) the country must participate in free trade with all of its goods and services.B) the country must follow market-based economics.C) the country must formally adopt the EU-wide rules such as technical standards, environmental inspections, banking supervision, etc.D) the country must be a stable functioning democracy.E) None of the above.

Answer: A

3) Which of the following is NOT one of the major problems with expanding the EU?A) Expansion has become a more difficult task because of the unwillingness of the eastern and central European countries to change.B) The programs that target EU expenditures could be stretched thin by the addition of countries with much lower incomes.C) The governance structure of the EU had to be changed to avoid becoming unwieldy and ineffective.D) The EU may be faced with an unstable eastern border with huge worker migratory flows if the transition economies fail.E) Most central and eastern European countries have large agricultural sectors and extending subsidies to these countries would entail an enormous flow of funds given the Common Agricultural Policy.

Answer: A

4) According to the principle of subsidiarity, in which of the following areas should the authority for making decisions be taken from national governments and given to the EU?A) Pollution of a trans-national waterwayB) Limits on the hours retails stores are allowed to be openC) Highway traffic lawsD) Recycling requirements on packagingE) All of the above.

Answer: A

4) The "Four Freedoms" do NOT include the right toA) vote in local elections.B) migrate within the EU.C) write insurance policies throughout the EU.D) open bank accounts anywhere in the EU.E) move goods from one country to another inside the EU.

Answer: A

6) Which of the following treaties/agreements would be associated with creating a free trade area for the European Union?A) Treaty of RomeB) Single Europe Treaty C) Delors AgreementD) Treaty on European UnionE) Schengen Agreement

Answer: A

1) Before the creation of the European Economic Community, there was theA) European Economic Union.B) European Coal and Steel Community.C) European Union.D) European Free Trade Area.E) Single European Community.

Answer: B

3) The "Four Freedoms" are an important goal of theA) Treaty of Rome.B) Single European Act.C) European Monetary System.D) Maastricht Treaty.E) European Free Trade Area.

Answer: B

4) The currency crisis of 1992 caused France and a number of other countries to choose betweenA) a single currency for the EU and keeping their own currency.B) doing the right thing for their domestic economy and defending the exchange rate.C) lowering interest rates and reducing unemployment.D) competitive devaluations and falling unemployment.E) the Maastricht Treaty and the Single European Act.

Answer: B

1) A narrow target zone exchange rate band (such as the EEC had until 1992) is most similar toA) a flexible exchange rate system.B) a single currency.C) a fixed exchange rate system.D) an undervalued currency.E) a managed floating exchange rate.

Answer: C

1) The single currency project in the EU will be most successful if European labor is relativelyA) immobile.B) immobile and business cycles are not synchronized.C) mobile and business cycles are synchronized.D) mobile and business cycles are not synchronized.E) mobile.

Answer: C

2) Which of the following is the treaty that took the participating countries from a free trade area to a common market?A) The Treaty of RomeB) The Maastricht TreatyC) Single European ActD) Treaty on European Union

Answer: C

2) Which of the following nations DOES use the euro and participates in the Treaty on European Union?A) SwedenB) DenmarkC) PortugalD) The United KingdomE) Norway

Answer: C

3) A major reason for creating the European Monetary System was toA) create a single currency.B) unify banking laws and permit cross-border investment.C) avoid competitive devaluations.D) reduce the costs of changing currencies.E) eliminate the need for central banks.

Answer: C

3) As Europe explored monetary union, evidence to date suggests that increased variability in exchange ratesA) reduces foreign trade and investment.B) increases foreign trade and investment.C) does not seem to have an impact on foreign trade and investment.D) hurts foreign investment but not trade.E) hurts foreign trade but not investment.

Answer: C

3) The founding document of the European Economic Community, and the document that continues to provide the basis for the European Union is theA) Treaty of Brussels.B) Delors Report.C) Treaty of Rome.D) Single European Treaty.E) Maastricht Treaty.

Answer: C

5) After implementation of the Single European Act, value added taxes in the EU wereA) completely harmonized.B) unchanged.C) partially harmonized with minimum and maximum permissible values set by the EU.D) eliminated except on a few items in each country.E) cut in half in order to increase the role of corporate taxes.

Answer: C

2) One drawback to a single currency is thatA) the exchange rate is more volatile.B) bond markets are larger and therefore harder to control.C) exporters and importers have fewer choices about how they will receive and make payments.D) individual nations cannot use monetary policy to stabilize the economy.E) foreign currency is more expensive.

Answer: D

2) The single most important factor in the 1992 crisis of the EMS wasA) ratification of the Single European Act.B) the near failure of the Maastricht Treaty.C) the fall in unemployment rates throughout the EEC.D) German reunification efforts.E) the outbreak of war in the former Yugoslavia.

Answer: D

3) Which nation is NOT one of the current members of the European Union?A) GreeceB) GermanyC) SwedenD) Norway

Answer: D

5) The principle of subsidiarity is a way toA) divide power between local governments and unions.B) provide support for industries in decline.C) provide support for industries under pressure from foreign competition.D) divide power between national governments and the EU.E) divide EU tax money among the member countries.

Answer: D

1) Which of the following is NOT part of the European Union?A) LuxembourgB) AustriaC) PortugalD) GreeceE) Switzerland

Answer: E

2) The primary legislative branch of the European Union is called theA) European Commission.B) European Parliament.C) European Court of Justice.D) European Council of Ministers.E) Council of the European Union.

Answer: E

10) Most cohesion funds in the EU budget go to the wealthier EU member nations.

Answer: FALSE

4) The fact that 10 additional nations joined the European Union in May 2004 is an example of deepening.

Answer: FALSE

5) Each of the 15 members of the European Union that joined before May 2004 use the euro as their currency.

Answer: FALSE

5) There is no possibility of further widening of the European Union.

Answer: FALSE

6) Emigration is when people leave a country because of supply push factors.

Answer: FALSE

6) Other nations had tried economic union in the past, and since adopting a common currency had shown economic benefits for them, the nations of Europe decided to try it too.

Answer: FALSE

7) All the countries of the EU participate in the Schengen Agreement.

Answer: FALSE

8) The Single European Act was expected to create economic benefits by reducing the costs and risks of currency market transactions.

Answer: FALSE

9) The Maastricht Treaty eliminated passport controls at borders with the European Union.

Answer: FALSE

1) As populations age, public spending tends to increase.

Answer: TRUE

4) The European Union is the oldest, largest, and most ambitious integration agreement in the world today.

Answer: TRUE

7) Adopting the Single European Act had broad popular support; the Treaty on European Union was more controversial.

Answer: TRUE

8) The roots of the European Union are in agreements within the coal and steel industries.

Answer: TRUE

9) Subsidiarity requires nations to give up some of their national sovereignty.

Answer: TRUE