What is an "optimal currency area"? Also, discuss the conditions that must be satisfied for an optimal currency area to exist
What will be an ideal response?
An optimal currency area would be a region where one currency could be used. There are two conditions needed for this to be successful: similar shocks in the countries and high factor mobility.
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Country A has real GDP per person of 100,000 while country B has real GDP per person of 200,000 . All else constant, country A will eventually have a higher standard of living than country B if
a. the level of saving per person is 10,000 in country A and 10,000 in country B. b. the level of saving per person is 12,000 in country A and 15,000 in country B. c. Both of the above are correct. d. None of the above are correct.
Which of the following is necessary for an economy to self-adjust fairly quickly, according to classical economists?
a) The use of monetary policy b) A high unemployment rate c) The use of fiscal policy d) Flexible wages and prices
Which statement is false?
A. Until the 1980s, S & Ls were legally barred from paying shareholders more than a certain rate of interest. B. S & Ls were not in financial trouble until the late 1980s. C. The 1980s was not a very good decade for the S & Ls. D. Until the 1980s only commercial banks were legally allowed to issue checking accounts.
If the price of a resource is greater than its marginal revenue product, the firm should:
A. Charge a higher price for its product B. Make no change in the units of the resource used C. Increase the units of the resource used in order to increase profits D. Decrease the units of the resource used in order to increase profits