The Exchange Rate Mechanism (ERM)crisis in 1992 Represents the __________

question 11

Multiple Choice

The exchange rate mechanism (ERM) crisis in 1992 represents the __________ in German interest rates that caused other European interest rates to __________,and resulted in less aggregate spending.

• A) increase;increase
• B) increase;decrease
• C) decrease;decrease
• D) decrease;increase

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Definitions:

Private Benefits

The direct advantages or gains accruing to an individual or organization from their economic actions, excluding wider societal impacts.

Producer Surplus

The difference between the amount that producers are willing to accept for a good or service and the actual amount they receive in the market.

Externality

A cost or benefit from production or consumption that accrues to someone other than the immediate buyers and sellers of the product being produced or consumed (see negative externality and positive externality).

Third Party

An individual or group besides the two primarily involved in a transaction or legal matter, sometimes involved as an intermediary or independent party.