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:

Entry Barriers

Obstacles that prevent new competitors from easily entering an industry or area of business.

Pure Competition

A market structure characterized by a large number of small firms, homogenous products, and free entry and exit, leading to price determination by supply and demand.

Pure Monopoly

A market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which nonprice competition may or may not be found.

Entry Barriers

Obstacles that make it difficult for new competitors to enter an industry, including high startup costs, access to technology, and strict regulations.