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Q. Illustrate why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies, it is unable to keep at least some monetary independence.
Answer: Any independent money supply vary in Norway would put pressure on krone interest rates and therefore on the krone/euro exchange rate. Therefore by pegging the krone even to a single foreign currency Norway completely surrenders its domestic monetary control.
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Q. What is the Fisher Effect? Provide an example. Answer: All moreover equal a rise in a country's expected inflation rate will ultimately cause an equal rise in the i
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Q. How mobile is Europe's labor force? Answer: Differences in culture and language discourage labour movements between European countries. Differences in regional unempl
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