In the Example of the Peg Between Britain and Germany

question 4

Multiple Choice

In the example of the peg between Britain and Germany, what would have been the case if Britain had allowed the pound to float and depreciate after Germany's GDP rise?

• A) Britain would have suffered depreciation and a recession.
• B) Britain would have had to raise interest rates.
• C) Britain would no longer be eligible to join the new euro currency.
• D) Britain could have lowered interest rates and enjoyed an added boost to GDP.

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