Related to the Chapter? Opener] An article in the Economist magazine in 2016 not
ID: 1166660 • Letter: R
Question
Related to the Chapter? Opener] An article in the Economist magazine in 2016 notes that the open double quoteeuro crisisclose double quote ?didn't keep four additional countrieslong dash?Slovakia, ?Estonia, Latvia, and Lithuanialong dashfrom joining the eurozone since? 2009: open double quoteTheir experience suggests that the euro still has its? benefits, but also some familiar risks.close double quote ?Source: open double quoteSELL ?Signals,close double quote Economist?, May? 14, 2016. What was the root cause of the euro? crisis? A. Wildly fluctuating exchange rates B. Sovereign debt Your answer is correct.C. Lower than normal nominal rates D. Large government surpluses All of the following are benefits to a country from being a member of the? eurozone, except: A. a common? central-bank rate. B. a reduced? exchange-rate risk in financial transactions. C. a reduced? exchange-rate risk in international commerce. D. the elimination of the transaction costs of currency conversion. Click to select your answer and then click Check Answer.
Explanation / Answer
(Question 1) Option (B)
Root cause of euro crisis is the huge amount of debt owed by the Eurozone members which were not disclosed during signing of the Masstricht Treaty. As a result, there started the actual and potential risks of soverign debt default by some countries.
(Qustion 2) Option (C)
In international commerce and trade, the exchange-rate risk will depend on the currency (and its value) of the trading partner outside Eurozone. Membership of EUrozone does not lower or eliminate this risk.