Which of the following is a problem for monetary policy in a currency union ?
Correct answer: D. The interest rate may be higher than is appropriate for economic conditions in some countries while it's lower than is appropriate in some others monetary policy must be one size fits all
- A. Money supply is more difficult to control in a currency union.
- B. The inflation-unemployment trade-off is more unstable in a currency union
- C. All of these answers describe problems for monetary policy in a currency union
- D. The interest rate may be higher than is appropriate for economic conditions in some countries while it's lower than is appropriate in some others monetary policy must be one size fits all
Explanation
A common monetary policy cannot suit every member of a currency union because countries may face different economic conditions, making the shared interest rate too high for some and too low for others. This is the one-size-fits-all problem.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
The socially optimal rate of growth is ?
To anticipate what the economy is going to do next the government will look at ?
Friedman's theory of consumption focuses on ?
Which of the following could not be described as an asymmetric macroeconomic shock ?
Which one of the following is not an argument in support of the UK joining the EMU ?
To try to overcome the free rider problem, the members of EMU signed ?