EMU - Eurozone crisis Flashcards
What is Basic Neo-classical?
Means that people and companies act in their self-interest to make the most profit
What Is Keynesianism theory?
The government can spend money to boost the economy when it’s not doing well
What is Fiscal policy?
The government decides how much money to spend, how much to collect in taxes, and what to spend it on to keep the economy healthy and balanced.
What is Monetary policy?
The central bank decides how much money is in circulation and sets interest rates to keep prices stable and the economy healthy
What is Balance of payments on current account?
- Value of exports of goods and services
- Shows whether the EU is earning more from trade and investments with other countries or spending more.
What is Optimal currency areas?
Places where it makes sense to use the same currency, like the Euro
What is Ad hoc loans?
When countries in the EU need extra cash for something unexpected, so they get a loan to cover it.
What is Euro-Keynesianism?
Using government spending to help the economy when it’s not doing well
What is fiscal integration?
EU countries work together on financial matters, such as taxes and spending, to create a more connected and coordinated economy
What is Budget deficit?
When a government spends more money than it collects in revenue
What was the convergence criteria for the EMU?
- Controlled inflation rate (max 1,5%)
- Annual budget deficit: max. 3% of GDP
- Gross public debt: max. 60% of GDP
- Currency stability - Fluctuation around a central rate (e.g. DK: 2,25%)
How many countries have adopted the Euro?
20
What is the history of the Euro.
The path startet In 1992 at the Maastricht treaty and the first 11 countries had the Euro in 1999.
What are the arguments for using the Euro?
- Reduce transaction costs and exchange rate risks
- Avoid speculative attacks on national currencies
- Avoid competitive devaluations in the SEM
- Political – Take a major step towards a more integrated EU
What is a problem with having A single exchange rate and monetary policy?
It may not suit the needs of all member states, limiting their flexibility in responding to economic imbalances - This weakens national economic management and results in a loss of economic and political sovereignty for member states.
