Within a currency union, the financial markets will
A) tend to expect the member governments to support one of their number that is having difficulty in order to avoid seeing that government default on its debt.
B) tend to expect the member governments to remove from the union one of their number that defaults on its debt.
C) no longer be needed to lend to governments.
D) be much better regulated.

Question

Quizplus · Accepted Answer

Within a currency union, financial markets tend to expect member governments to support one of their number that is having difficulty in order to avoid seeing that government default on its debt. This is because if one member government defaults on its debt, it can have negative consequences for the entire currency union.

Within a Currency Union, the Financial Markets Will