Which of the following are widely recognized disadvantages to the Euro area of having a common currency? (Check all that apply.) A. The perpetuation of disparate economic conditions across member states. B. A symbol of unity among nations previously experiencing much conflict. C. The implementation of a uniform monetary policy across many economies. D. The elimination of the exchange rate as a policy instrument E. The elimination of the uncertainty that derives from multiple currencies. Solution Correct option: C Explanation: a common currency requires a single monetary policy. This means interest rates being set centrally for all Euro countries. Suppose European Central Bank may want to change interest rates, that would simply worsen the recession for country with weaken economy..

1. Which of the following are widely recognized disadvantages to the Euro area of having a
common currency? (Check all that apply.) A. The perpetuation of disparate economic conditions
across member states. B. A symbol of unity among nations previously experiencing much
conflict. C. The implementation of a uniform monetary policy across many economies. D. The
elimination of the exchange rate as a policy instrument E. The elimination of the uncertainty that
derives from multiple currencies.
Solution
Correct option: C
Explanation: a common currency requires a single monetary policy. This means interest rates
being set centrally for all Euro countries. Suppose European Central Bank may want to change
interest rates, that would simply worsen the recession for country with weaken economy.