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 falls to other countries of the currency union, and so unemployment remains lower than it otherwise would
D. Real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency

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 usa and labour law is much more restrictive in the erozone than in the usa on these measures the eurozone is less likely to be an oca than is the usa
C. The eurozone has a higher degree of labour mobility than the usa but labour law is much more restrictive in the erozone than in the usa on these measures it is hard to judge whether the eurozone is more or less likely to be an oca than is the usa
D. The eurozone has a lower degree of labour mobility than the usa and labour law is much less restrictive in the erozone than in the usa on these measures it is hard to judge whether the eurozone is more or less likely to be an oca than is the usa

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

Which one of the following is not an argument in support of the UK joining the EMU ?

A. None of these arguments they are all arguments in support of the uk joining the umu
B. The characteristics of the uk housing market make uk consumers expenditure very sensitive to changes in interest rates
C. The uk risks exclusion from the euroland capital market with damaging consequences with damaging
D. The uk needs to be a member of the emu in order to continue to attract such large share of foreign direct investment in eu countries

When the financial system lacks the capability of making judgement about investment opportunities due to asymmetric information leading to potentially bad credit risks lending is subject to ?

A. Adverse selection
B. Moral hazard
C. Social goods
D. Hyperinflation

Central banks in LDCs generally have less effect on expenditure and output than in LDCs because of ?

I- An externally dependent banking system
Ii- a poorly developed securities market
Iii- a low percentage of demand deposits divided by the total money supply
Iv- the relative insensitivity of investment and employment to monetary policies

Which of the following are costs of inflation ?

I- Inflation weakens the creation of credit and capital markets
Ii- inflation distorts business behavior especially investment behavior
Iii- inflation increase the price of foreign goods relative to domestic goods
Iv- inflation imposes a tax on the holders of money

Under financial repression ?

I- Banks engage in non-price rationing of loans
Ii- banks face pressure for loans to those with political connections
Iii- banks charge a high premium on foreign investments
Iv- banks depend on foreign banks to set interest rates

By using fiscal policy, i (e) varying ______ and/or _____ governments achieve goals for output and employment growth as well as price stability?

A. Demand pull inflation tax elasticity
B. Interest rates, financial liberalization
C. Interest rates, tax rates
D. Tax rates, government spending

_______ states that as real GNP per capita rises, people demand relatively more social goods and relatively fewer private goods?

A. Incomes policy
B. Moral hazard
C. Wagner’s law
D. Fiscal policy