Suppose that the United Kingdom pegs the pound to the euro. If all other things remain unchanged, what would you expect to happen to European interest rates if all countries who use the euro decided to adopt expansionary fiscal policies?

Question

Quizplus · Accepted Answer

Expansionary fiscal policies in eurozone countries would likely increase demand for money and push up interest rates, as governments borrow more to finance their spending.

Suppose That the United Kingdom Pegs the Pound to the Euro