The Introduction of the Euro Is Expected To

question 20

Multiple Choice

The introduction of the Euro is expected to:

• A)increase the transactions cost of trading foreign bonds.
• B)decrease the transactions cost of trading foreign bonds.
• C)have no effect on the transactions cost of trading foreign bonds.
• D)have a minimal effect on the transactions cost of trading foreign bonds.

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Definitions:

Private Sector

The part of the economy that is run by individuals and companies for profit and is not state controlled.

Transaction Costs

Transaction costs are the expenses incurred in buying or selling goods or services, which can include search and information costs, bargaining costs, and enforcement costs.

Optimal Pigouvian Tax

A tax designed to correct the inefficiencies in a market that experiences externalities, set at a level that equates the marginal social cost of the externality with the marginal social benefit.

Socially Optimal

Pertains to a condition where resources are allocated in the most efficient manner from the perspective of society as a whole.