Reunification of East and West Germany created which sequence of events? I. an increase in German rates of interest
II) a boom in German output and a shift to the right of the German IS curve
III) large reunification costs financed by increased government spending
IV) an increase in rates of interest in ERM nations
A) IV, I, III, I
B) III, II, I, IV
C) I, II, III, IV
D) IV, III, II, I

Question

Quizplus · Accepted Answer

The reunification of East and West Germany led to large reunification costs which were financed by increased government spending, thus resulting in an increase in German rates of interest (III, I). However, the boom in German output and a shift to the right of the German IS curve (II) did not directly result from the reunification, but rather from other factors such as a favorable global economic environment and German economic policies. Furthermore, the reunification did not directly lead to an increase in rates of interest in ERM nations (IV).

Reunification of East and West Germany Created Which Sequence of Events