The Free Rider Problem That Arises in a Currency Union

question 52

True/False

The free rider problem that arises in a currency union is that a member government that borrows heavily may not be obliged to pay as high a rate of interest on its borrowing as it would if it were not a member of the currency union, while the other governments of the currency union find the financial markets require them to pay higher interest on their borrowing because of the high borrowing of one of their neighbours.

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