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Q. "Given that labor remains relatively immobile within Europe, the European Union's success in liberalizing its capital flows may have worked perversely to worsen the economic stability loss due to the process of monetary unification." Discuss.
Answer: most likely right this is another illustration of the theory of the second best. If the Netherlands undergoes an unfavourable shift in output demand Dutch capital is able to flee abroad leaving even more unemployed Dutch workers behind than in the case of government regulations that were to delay the movement of capital outside the Netherlands. Severe and importunate regional depressions could result worsened by the probability that the relatively few workers who did successfully emigrate would be precisely those who are most reliable, enterprising, and skilled.
Q. If trade were to open up between R and P, where could the world terms of trade locate in the figure above (somewhere on the PC/PF axis)? Could relative wages (w/r) in the two c
Q. How much trade do currency unions create? Answer: The major result is that currency unions promote trade. One study originate that on average two countries that are
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