Describe the effects of the reunification of eastern and western Germany in 1990 on both Germany and its neighboring European countries using the AA-DD framework
What will be an ideal response?
As for Germany a period of boom with high interest rates to fight inflation.
Other European countries: France, Italy and UK in recession, trying to match the high German interest rates to hold their currencies fixed against Germany's, thereby pushing their economies into deep recession. Other European countries tried to continue the fixed exchange rate in order not to lose the credibility they had build up since 1985. The policy conflict between Germany and the other European countries led to a series of fierce speculative attacks on the EMS exchange parities starting in September 1992. By August 1993, the EMS was forced to retreat to very wide (± 10 percent) bands, which was kept in force until the introduction of the euro in 1993.
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Unemployment that results from an economy-wide downturn is called: a. frictional unemployment. b. cyclical unemployment
c. structural unemployment. d. seasonal unemployment.
Andrea would be considered unemployed if she is
a. working at a part-time job but is looking for a full-time job. b. absent from her regular job as the result of illness. c. working at a full-time job but is looking for a part-time job. d. not working and is looking for a part-time job.
Inflation is
A) a one time increase in the general level of prices. B) a persistent increase in the price of an individual good, service or resource. C) a persistent increase in the general level of prices. D) a one time increase in the price of an individual good or service.
Which of the following statements is true?
A) Real GDP fluctuates around potential GDP. B) Potential GDP fluctuates around real GDP. C) Potential GDP is the same as real GDP. D) When all of the economy?s resources are fully employed, the value of production is called real GDP.