If the current number of participating countries in the Euro system is nineteen as of 2017 and the number of large countries is four (Germany, France, Italy, and Spain), are policies likely to favor small or large countries? Explain.
What will be an ideal response?
The Governing Council is made up of the Executive Board and the Governor of the NCB of each participating country. If there are nineteen participating countries and four are large, this leaves at fifteen members of the Council from small countries. And that isn't all, as half of the six Executive Board members are typically from small countries. The consequence of this is a bias toward the smaller countries since the median country would tend to be fairly small. Fortunately the experience so far has shown that the Governing Council has done its job of representing the euro area and has not shown a bias to smaller countries.
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What will be an ideal response?
Grant has $200 to spend each month on restaurant meals and jazz performances at his
neighborhood jazz club. The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10. Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances. Suppose Grant still has $200 to spend, but the price of restaurant meal rises to $25, while the price of jazz performance ticket drops to $8. Can it be determined if Grant is better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.
An aggregate production function, when shown on a graph,
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