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Labour mobility and wage-price flexibility

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Reference no: EM133124243

I. True/False/Uncertain - Briefly explain. No credit without an explanation.

  1. Labour mobility and wage/price flexibility are needed for adjustment to temporary shocks in a mone- tary union. TRUE
  2. The larger the internal sovereign debt, the more likely a sovereign default in a monetary union. 
  3. The Lender of Last Resort (LOLR) function of the central bank poses a moral hazard risk. 
  4. Internal devaluation (i.e. lower wages/prices) is an alternative adjustment mechanism to an exchange rate devaluation. 

Reference no: EM133124243

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