The ECB cannot simultaneously raise employment in Italy while fighting inflation in Ireland. This problem arises because exchange rates are fixed between countries using the euro.

Question

Quizplus · Accepted Answer

The European Central Bank (ECB) implements monetary policy for the entire Eurozone, not for individual countries. Therefore, it cannot tailor its policy to address specific economic conditions in individual member states like Italy or Ireland. Fixed exchange rates within the Eurozone mean that individual countries cannot adjust their exchange rates to manage their own economic conditions independently.

The ECB Cannot Simultaneously Raise Employment in Italy While Fighting