Which of the Following Is a Problem for Fiscal Policy

question 16

Multiple Choice

Which of the following is a problem for fiscal policy in a currency union?

• A) The central bank controls interest rates on long-term bonds issued by the governments of the member countries of the currency union.
• B) Governments of the member countries of the currency union may run large budget deficits and so crowd out private investment.
• C) Governments of the member countries of the currency union may run large budget deficits and so impose costs on other countries by pushing up interest rates on the bonds these countries' governments issue.
• D) It is difficult to raise enough tax revenue to pay for the operation of the currency union.
• E) Governments of the member countries of the currency union may run large budget deficits and so force taxes to be increased across all countries of the currency union.

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Definitions:

Retinal Image

The image projected onto the retina, which is the light-sensitive layer at the back of the eye.

Increasingly Larger

Describes a process or condition that grows or expands in size, volume, or quantity over time.

Distance

A measurement of the space between two points, often discussed in the context of physical space but also applicable in abstract senses.

Retinal Image

The image projected onto the retina, the light-sensitive tissue at the back of the eye, which allows one to see.