Why Was It Important That the Stability and Growth Pact

question 24

Multiple Choice

Why was it important that the Stability and Growth Pact should allow eurozone member countries to run modest budget deficits?

• A) With no scope for using an independent monetary policy, it is vital that eurozone members should be permitted to run budget deficits sufficient to allow for the operation of automatic fiscal stabilizers.
• B) To facilitate free trade, it's important that eurozone members should not be unduly restricted in their use of fiscal policy.
• C) While stability is provided by monetary union, growth requires that countries run budget deficits.
• D) All of a, b and c are correct.

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Definitions:

Leap Years

Years in which an extra day is added to the calendar (February 29) to keep the calendar year synchronized with the astronomical year.

Interest Computation

The process of calculating the amount of interest earned or paid over a certain period, considering the principal amount, interest rate, and time.

Maturity Value

The amount payable to the holder of a financial instrument at the date when the instrument becomes due and payable, including principal and any applicable interest.

365-Day Year

A calendar model assuming exactly 365 days in a year, commonly used for calculating interest in finance.