Fiscal Federalism Can Be Argued to Be Important in a Common

question 3

Multiple Choice

Fiscal federalism can be argued to be important in a common currency area because

• A) it is likely that some member countries of the common currency area will have larger populations than others.
• B) fiscal policy is needed to stabilize the economy of any of the member countries of the common currency area if and when a member country is affected by an asymmetric macroeconomic shock.
• C) fiscal policy is a controversial issue.
• D) central banks cannot be given responsibility for fiscal policy

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Definitions:

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