Explain why the European Union's current combination of rapid capital migration with limited labor migration may actually raise the cost of adjusting to product market shocks without exchange rate change?
What will be an ideal response?
If the Netherlands suffers an unfavorable shift in output demand, Dutch capital can flee abroad, leaving even more unemployed Dutch workers behind than in the case of government regulations that were to hinder the movement of capital outside the Netherlands. Severe and persistent regional depressions could result, worsened by the likelihood that the relatively few workers who did successfully emigrate would be precisely those who are most skilled, reliable, and enterprising. This is another example of the theory of the second best.
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An advantage of using the cross-sectional regression method in estimating production is that
A) the problem of technological change over time is overcome. B) there is no need to adjust data, which are in monetary terms for geographical differences. C) we can assume that all plants operate at their most efficient input combinations. D) All of the above
Harmful carbon emissions
A) are increasingly produced by industrializing countries such as China and India. B) are only a problem in high-income countries. C) must be reduced by countries individually. D) have little effect on the environment.