Which of the Following Is True for Countries That Have

question 48

Multiple Choice

Which of the following is true for countries that have formed a monetary union?

• A) A monetary union allows the member countries to stabilize the business cycle.
• B) A monetary union makes it easier to adjust interest rates according to the requirements of
• C) In a monetary union, fiscal policy is more effective than monetary policy in increasing aggregate demand.
• D) In a monetary union, member countries do not have monetary policy independence.

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Definitions:

Utility Possibilities Frontier

Curve showing all efficient allocations of resources measured in terms of the utility levels of two individuals.

Production Possibilities Frontier

Curve showing the combinations of two goods that can be produced with fixed quantities of inputs.

Pareto Optimal

A state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.

Marginal Rate

The rate at which one variable changes with respect to a minute change in another variable.