The New Stability Pact Signed in 2011 by the Nations

question 193

Multiple Choice

The new stability pact signed in 2011 by the nations that adopted the euro required each country to:

• A)balance its budget annually.
• B)keep its actual budget deficit below 3% of its GDP.
• C)keep its structural budget balance to 0.5% or less of its GDP.
• D)supply a certain amount of euros each year.

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Definitions:

Optimal Structure

The most efficiently arranged composition of an entity or process to maximize performance or outcomes, often used in the context of financial capital structure or organizational design.

Operating Leverage

A measure of how revenue growth translates into an increase in operating income, indicating the extent to which a company can increase profitability by increasing sales.

Financial Leverage

The use of borrowed funds in an attempt to increase the returns to equity.

Fixed Costs

For expenses like rent, salaries, and insurance premiums, their amounts do not fluctuate with the levels of output or sales.