Discussion Forum : Fiscal And Monetary Policy
Question - If two countries A and B are member of a currency union and there is a shift in consumer preferences away from the goods of country A and towards those of country B than which one of the following would help to offset the effect of the resulting changes in aggregate demand in A and B on inflation and unemployment in the tow countries ?
Options:
A .  A high degree of labour mobility between the tow countries
B .  An increase in government spending in country (A)
C .  A depreciation in the foreign exchange value of the common currency
D .  A low degree of capital mobility between the two countries
Answer: Option A
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