ECOWAS Plans to Merge with the WAEMU by 2004

question 88

Multiple Choice

ECOWAS plans to merge with the WAEMU by 2004. Which of the following is not a convergence criteria for the merger?

• A)ECOWAS members must control inflation to 5%.
• B)ECOWAS countries must have a maximum budget deficit-to-GDP ration of 4%
• C)Central bank financing of the budget deficit is limited to 10% of the previous year's tax revenue
• D)All of the above are required.

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Definitions:

Nominal Interest Rate

The rate of interest before adjustments for inflation, representing the face value of interest payments.

Inflation-adjusted Value

The value of money after accounting for changes in price level over time, adjusting figures to reflect current purchasing power.

Equilibrium Interest Rate

The interest rate at which the demand for money in an economy equals the supply of money, establishing a state of balance in the financial markets.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on an investment.