Author Question: The level of fiscal federalism in the European Union is A) too big to cushion member countries ... (Read 145 times)

Pineappleeh · **on:** Jun 30, 2018

The level of fiscal federalism in the European Union is

A) too big to cushion member countries from adverse economic events.
B) too small to cushion member countries from adverse economic events.
C) appropriate to cushion member countries from adverse economic events.
D) too big relative to the one in the U.S.
E) similar in its level to that of the U.S.

Question 2

Fixed exchange rates are not even an option for most countries. Discuss.

What will be an ideal response?

cpetit11 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

B

Answer to Question 2

Durable fixed exchange rate arrangements may not even be possible unless countries are willing to maintain strict controls over capital movements (as China does), or, at the other extreme, move to a shared single currency with their monetary partners (as in Europe). Even a country following prudent monetary and fiscal policies is not safe from speculative attacks on its fixed exchange rate.