Author Question: Discuss some of the potential benefits and costs of the adoption of the Euro. What will be an ... (Read 19 times)

cdr_15 · **on:** Jun 30, 2018

Discuss some of the potential benefits and costs of the adoption of the Euro.

What will be an ideal response?

Question 2

Discuss what is meant by labor market rigidities and explain how they might cause the relatively high unemployment in Europe.

What will be an ideal response?

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

Answer to Question 1

One of the benefits of the Euro is largely symbolic. Countries that have in the past century been in wars against each other are now using the same currency. There are economic benefits as well. The use of the same currency will eliminate the need to convert currencies when, for example, buying foreign goods from a country that has also adopted the Euro. One of the possible costs of the Euro is that it will force countries to pursue the same monetary policy. No longer will policy makers in these countries pursue independent monetary policy.

Answer to Question 2

Examples of labor market rigidities are: relatively high minimum wage, relatively high unemployment benefits, and relatively high level of worker protection. All three of these are hypothesized to cause a reduction in employment and, therefore, an increase in the unemployment rate.