If two countries A and B are member of a currency union and there is a shift in consumer preferences away from the goods of country A and towards those of country B than which one of the following would help to offset the effect of the resulting changes in aggregate demand in A and B on inflation and unemployment in the tow countries ?

Related Mcqs:

A high degree of real wage flexibility will tend to reduce the cost to a country of joining a currency union because ?

A. All of the reasons given in these answers are correct B. real wages fall rapidly in a recession and the economy moves quickly back to long run equilibrium so limiting the duration of the recession even when exchange rate adjustment is not possible C. workers will move from a country in which aggregate demand … A high degree of real wage flexibility will tend to reduce the cost to a country of joining a currency union because ?Read More...

How does the eurozone compare with USA as a possible optimal currency area (OCA) ?

A. The eurozone has a higher degree of labour mobility than the USA and labour law is much less restrictive in the erozone than in the USA On these measures the eurozone is more likely to be an OCA than is the USA B. The eurozone has a lower degree of labour mobility than the … How does the eurozone compare with USA as a possible optimal currency area (OCA) ?Read More...

To try to overcome the free rider problem, the members of EMU signed ?

A. the stability and growth pack B. the European solidarity packs C. the exchange rate mechanism pact D. the responsibility and growth pack...

What is fiscal federalism ?

A. A fiscal system for a group of countries in which fiscal policy is set in a treaty signed by all the countries B. A fiscal system for a group of countries in which government budget deficits are strictly limited C. A fiscal system for a group of countries involving a common fiscal budget and … What is fiscal federalism ?Read More...

Which of the following is a problem for fiscal policy in a currency union ?

A. The central bank controls interest rates on long-term bonds issued by the governments of the member countries of the currency union B. Government of the member countries of the currency union may run large budget deficit and so crowd out private investment C. government of the member countries of the currency union may run … Which of the following is a problem for fiscal policy in a currency union ?Read More...