Discuss the Two Sets of Issues That Dominated the Agenda

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The Answer is The first issue is the relatively high unemployment rate in Europe. Specifically, what has caused this high unemployment (e.g. labour market rigidities, wage explosion, and/or inadequate macro policies) and, therefore, what can be done to reduce it? The second issue deals with the effects of the adoption of the Euro. The benefits of using the same currency will be the reduced costs and uncertainty from eliminating nominal exchange rate uncertainty. The cost of adopting a common currency is losing the ability of using monetary policy for the domestic economy. Instead, a common monetary policy decision is handed down from the European Central Bank (ECB) to the member states. Since it is likely that member countries experience different phases of the business cycles (e.g. some may experience a recession and wish for monetary loosening and others may prefer monetary tightening to slow the economy down), there are costs associated with the Euro when countries are faced with country- specific shocks.

Discuss the Two Sets of Issues That Dominated the Agenda

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Discuss the Two Sets of Issues That Dominated the Agenda

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Correct Answer:
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