In the case of a currency union, what is a nominal anchor?
A) It is the weight of the efficiency loss from changing to a common currency.
B) It is an independent value, such as the value of the common currency unit, constraining the ability of a nation to inflate its currency and prices.
C) It is a nominal measure of GDP that is not the same as the measure for real GDP.
D) It links that nation to other members of the currency union and permits no trade or financial relationships outside the union.
Ans: A) It is the weight of the efficiency loss from changing to a common currency.
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Efficiency is an important motive for merger
Indicate whether the statement is true or false
The effect of a quota is to
A) increase quantity supplied and lower price. B) increase quantity supplied and increase price. C) increase demand for the good and increase price. D) reduce quantity supplied and raise price.
Regardless of quantity in long-run equilibrium, the competitive price-taker market price cannot exceed the
a. long-run average cost of supplying that quantity. b. total variable cost of supplying that quantity. c. long-run total cost of supplying that quantity. d. minimum long-run marginal cost of supplying that quantity.
Suppose hypothetically that you buy a lot of food such as tofu, veggie burgers, and organic fruit that are not included in the market basket used to compute the CPI. In addition, suppose that all of these goods have become cheaper over the last year, while the overall CPI has increased by 6 percent. Then which of the following is true?
A. The CPI will understate the negative impact of inflation on your purchasing power and standard of living. B. The CPI will still accurately state the negative impact of inflation on your purchasing power and standard of living. C. The CPI will overstate the negative impact of inflation on your purchasing power and standard of living. D. Inflation has a larger effect on your standard of living than on the average consumer.