Asked by Ashley Montgomery on Apr 25, 2024
Verified
If several nations decide to adopt and use a common currency, then each of these nations would lose the following, except
A) the ability to set its own interest rates.
B) the ability to set its own tax rates.
C) control of its own exchange rate.
D) the use of "external adjustment" tools to deal with current-account balance problems.
Common Currency
A currency that is used by multiple countries, simplifying trade and financial transactions between them, with the Euro being one of the most notable examples.
External Adjustment
The process by which an economy corrects imbalances in its balance of payments, through changes in exchange rates, demand, and supply in foreign exchange markets.
- Understand the consequences of adopting a common currency for national economic policies.
Verified Answer
PP
Persatuan Peranak6 days ago
Final Answer :
B
Explanation :
Adopting a common currency does not necessarily mean that nations have to give up their ability to set their own tax rates. However, they would lose the ability to set their own interest rates, control their own exchange rates, and use "external adjustment" tools to deal with current-account balance problems.
Learning Objectives
- Understand the consequences of adopting a common currency for national economic policies.