When Norway Unilaterally Fixes Its Exchange Rate Against the Euro

question 27

Multiple Choice

When Norway unilaterally fixes its exchange rate against the euro and leaves the krone

• A) free to float against the non-euro currencies, it is able to keep at least some monetary independence.
• B) free to float against the non-euro currencies, it is unable to keep at least some monetary independence.
• C) free to float against the non-euro currencies, it is able to keep its monetary independence.
• D) run by crawling peg against the non-euro currencies, it is able to keep at least some monetary independence.
• E) fixed against the non-euro currencies, it is unable to keep its monetary independence.

---

Definitions:

Alpha

The pre-determined significance level in hypothesis testing, often set at 0.05, which defines the likelihood of observing a result at least as extreme as the one seen in the sample data if the null hypothesis is true.

T-statistic

A type of statistic used in hypothesis testing, calculated as the ratio of the departure of an estimated parameter from its hypothesized value to its standard error.

Critical Value

A threshold in hypothesis testing, which the test statistic must exceed to reject the null hypothesis.

Level of Significance

A threshold in hypothesis testing, below which the null hypothesis is rejected, commonly set at values like 0.05 or 0.01.