Members of the European Monetary Union
A. adopt a common currency called the euro.
B. float their domestic currency exchange rate with both the euro and the rest of the world.
C. can continue to use their own domestic currency but are required to hold a stipulated amount of a common currency.
D. cannot hold reserves of the common currency.
Ans: A. adopt a common currency called the euro.
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Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:
A. shift into producing good Y. B. anticipate a price increase for good X. C. intensify its production of good X. D. charge a higher price for good X.
Provisions that cause changes in government spending and taxes that do NOT require action of the President or Congress are called
A. discretionary fiscal policy. B. private stabilization effects. C. automatic stabilizers. D. discretionary stabilizers.
On an unsecured loan, your bank will highly likely charge an interest rate
A. below the prime rate. B. below the discount rate. C. above the prime rate. D. below the federal funds rate.
Monetary policy designed to counteract a reduction in aggregate demand might include
A. a reduction in the money stock. B. a reduction in short-term interest rates. C. an increase in individual income tax rates. D. increased government infrastructure spending.