Monetary Union
An agreement between two or more states creating a single currency area.
What is Monetary Union?
Maastricht Criteria:
What is inflation rate cannot exceed 1.5% of best performance states, exchange rate must follow normal fluctuations for 2 years, ratio of deficit to gross GDP cannot exceed 3%, ratio of gross government debt to GDP cannot exceed 60%, long term interest rate must not be greater than 2% of best performance states
A geographical location in which a single currency creates better economic conditions than several currencies.
What is an optimum currency area?
The economic policy of countries before the 1930s.
What is Laissez-faire?
Economist that advocated for government intervention in a country's economy.
Who is John Maynard Keynes?
Reduced uncertainty (elimination of exchange rate risk), reduced transaction costs, price transparency
What are the Micro benefits of Monetary Union?
EU unemployment in 2018.
What is 7%?
Is the Eurozone and optimum currency area?
What is no?
An agreement to fix the exchange rate to the US dollar.
What is the Bretton Woods agreement?
Three alternative methods to approach an asymmetric demand shock.
What are wage flexibility, increased productivity, and labor migration?
End of competitive devaluations, European Seignorage, increased trade, improved anti-inflation reputation
What are the Macro benefits of Monetary Union?
Countries with a deficit higher than that of Maastricht Criteria. (Name at least three)
What are Greece, Italy, Portugal, France?
Proof that the Eurozone is not an optimum currency area.
What are the cultural differences between countries like Greece and Germany, countries being let in to the EU and Eurozone for political reasons, the Convergence criteria being ignored, and asymmetric demand shocks
Year the EMS was established.
What is 1979?
Goals of EMS.
What are to stabilize exchange rate and to promote economic and political unity in Europe?
Government freedom that is immediately lost once a country joins a Monetary Union.
What is Monetary Policy?
Countries with a debt higher than that of Maastricht Criteria. (Name at least three)
What are Greece, Belgium, Spain?
Example of an optimum currency area.
What is America?
Effect of East and West Germany unification on countries in the EMS.
What are increased interest rates, rising unemployment, and inflation?
He made 1 billion dollars shorting the pound.
Who is George Soros?
An unexpected change in aggregate demand or supply that affects only one country.
What is asymmetric shock?
A word to describe Eurozone growth performance. (starts with a d)
What is disappointing?
A negative effect of the Eurozone.
What is each country having less control over their monetary policy?
Date of Black Wednesday.
What is September 16, 1992?
The reasons why decreased wages, increased productivity, and labor migration are not feasible.
What are inflexible wages, inability to increase productivity on a whim, and cultural, language, and social security differences?