A small eastern European economy asks your opinion about whether they should pursue the path to joining the European Economic and Monetary Union (EMU) or simply “euroize” (i.e. dollarize by using the euro for all domestic transactions). What advice would you give?
Answer to relevant QuestionsPanama, Ecuador, and El Salvador began using the U.S. dollar as their domestic currency in 1904, 2000, and 2001, respectively. How do you expect their inflation rates to compare with U.S. inflation? Plot since 1960 the ...Explain why giving an independent central bank control over the quantity of money in the economy should reduce the occurrences of periods of extremely high inflation, especially in developing economies. Why might targeting the money supply lead to lower output growth than targeting the rate of interest?. Consider a country where the level of excess reserves fluctuates widely and unpredictably. Would such a country be a good candidate for a money growth rule to guide monetary policy? Explain your answer. Suppose that the aggregate expenditure curve can be expressed algebraically as AE = 3,000 – 2,000r,Where AE is aggregate expenditures and r is the real interest rate expressed as a decimal. You check the website of the ...
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