a) Inflation rate in Germany has been rising recently and many policy-makers are concerned. What would be the expected reaction of the ECB to this kind of development? Also, give two reasons why the ECB has not reacted so far. b) Some years ago, US Administration accused China of being a “currency manipulator". What was the reason for these accusations (what was wrong with Chinese currency according to the Americans?) and why would have China wanted to manipulate its currency? If these accusations were correct, with which measure could have China achieved this manipulated currency? c) Instead of using prohibitions as a policy measure, economists prefer using price mechanisms. Is CO2 tax an example of that? Explain.

a) Inflation rate in Germany has been rising recently and many policy-makers are concerned. What would be the expected reaction of the ECB to this kind of development? Also, give two reasons why the ECB has not reacted so far. b) Some years ago, US Administration accused China of being a “currency manipulator". What was the reason for these accusations (what was wrong with Chinese currency according to the Americans?) and why would have China wanted to manipulate its currency? If these accusations were correct, with which measure could have China achieved this manipulated currency? c) Instead of using prohibitions as a policy measure, economists prefer using price mechanisms. Is CO2 tax an example of that? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

a) Inflation rate in Germany has been rising recently and many policy-makers are concerned. What
would be the expected reaction of the ECB to this kind of development? Also, give two reasons
why the ECB has not reacted so far.
b) Some years ago, US Administration accused China of being a “currency manipulator". What
was the reason for these accusations (what was wrong with Chinese currency according to the
Americans?) and why would have China wanted to manipulate its currency? If these
accusations were correct, with which measure could have China achieved this manipulated
currency?
c) Instead of using prohibitions as a policy measure, economists prefer using price mechanisms.
Is CO2 tax an example of that? Explain.

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