Which of the following is true?
A)Although 15 countries in Europe have adopted a single currency called the euro, each country still retains control over its own monetary policy.
B)The Eurosystem implements and carries out monetary policy for the eurozone.
C)If countries have divergent policies, then a fixed exchange rate system is preferable over a flexible exchange rate system.
D)Under a flexible exchange rate system, capital flows free countries to have absolute control over their own monetary policies and exchange rate risk is reduced.

Question

Quizplus · Accepted Answer

The Eurosystem, which includes the European Central Bank and the national central banks of the eurozone countries, is responsible for implementing and carrying out monetary policy for the eurozone. Option A is incorrect because once a country adopts the euro, it gives up control over its own monetary policy to the Eurosystem. Option C is incorrect because a fixed exchange rate system can create problems if countries have divergent policies, while option D is incorrect because under a flexible exchange rate system, exchange rate risk can actually increase due to volatility in capital flows.

Which of the Following Is True