Is the European Monetary Union a form of dollarization? Explain.
What will be an ideal response?
No it isn't. Using an example form the chapter, Ecuador adopted dollarization, in effect, giving up their currency and using dollars for all transactions. Ecuador is not represented on the FOMC and the FOMC does not consider what is best for Ecuador in making their policy decisions. In addition, Ecuador and other countries that have adopted dollarization do not share in the revenue from seignorage. With the European monetary union while each country uses the same currency, the euro, each country's interest is represented in policy meetings and each country shares in the revenue from seignorage.
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If a country experiences a real GDP growth rate of 6 percent, real GDP will double in
A) 10 years. B) 17.5 years. C) 16.67 years. D) 11.67 years. E) 14 years.
Which of the following is not a criticism of flexible exchange rates?
a. All of the following. b. They are volatile, which increases risks for importers and exporters. c. They could affect employment and increase demand for trade restrictions. d. They do not allow for discretionary monetary policy. e. They allow central banks to follow expansionary monetary policies.
Which of the following will decrease the amount of a good that is traded in the market?
a. price floors and price ceilings b. excise taxes, price floors, and subsidies c. excise taxes d. subsidies e. price floors, price ceilings, and excise taxes
Consumer surplus is difference between the ________ a consumer would pay for a given quantity of a good and what the consumer ________ pays
a. least; actually b. least; wants c. most; actually d. most; wants