What are the disadvantages of adopting a single currency? Explain
What will be an ideal response?
In addition to its political symbolism, the adoption of a common currency also means that the country no longer has its own money supply as a tool for managing its economic growth. A second potential cost to adopting a single currency is that countries give up their ability to alter their exchange rates. Exchange rate adjustments are sometimes the least costly way to restore competitiveness after a round of price increases.
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Differentiate between the income effect and the substitution effect of a fall in the price of a good
What will be an ideal response?
The interest income earned on most municipal bonds in the United States is tax exempt. Thus, for such municipalities
A) the level of public investment projects is lower than it would be otherwise. B) municipal tax revenues are higher than they would be otherwise. C) the user cost of cost capital is lower than it would be otherwise. D) All of the above are correct.