Chapter 3 Essay questions

  1. What are the reasons why the systemic risk in a monetary union might actually increase, despite the fact that the exchange risk is eliminated? Identify the factors that contribute to this outcome. Is this likely to be the case in the European monetary union?
  2. Explain why producers might be better off in an environment characterized by exchange risk. What does this depend on?
  3. Is the relationship between exchange risk and welfare a linear one?
  4. Identify the factors that may boost economic growth in a monetary union?
  5. If such growth-boosting effects of a monetary union exist, are these likely to be temporary or permanent?
  6. Why is it that these growth-boosting effects have been so weak in the Eurozone?
  7. Is there evidence that small countries are more likely to be part of a monetary union?
  8. Why are the benefits of a monetary union likely to be larger for small and relatively open economies than for large and relatively closed economies?
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