If One Euro Nation Is Experiencing Rapid Growth and Inflation

question 148

Multiple Choice

If one euro nation is experiencing rapid growth and inflation while another is facing sluggish growth and recession:

• A)the European Central Bank ought to employ a tight monetary policy.
• B)the European Central Bank ought to employ an easy monetary policy.
• C)the two countries will disagree about the monetary policy that ought to be employed by the European Central Bank.
• D)only an appreciation of the euro can help both countries simultaneously.

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Definitions:

Disposable Income

Income available to households for saving and expenditure post-income tax deductions.

Consumption

The action or process of using goods and services for personal, household, or organizational needs.

Marginal Propensity

The proportion of an additional unit of income that is used for consumption; more specifically referred to as the marginal propensity to consume.

Net Wealth

The value of assets minus liabilities.