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Impact of Weakness in the Eurozone Periphery on Germany

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Impact of Weakness in the Eurozone Periphery on Germany

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Questions and Answers

What exorbitant privilege has Germany had due to its position within the eurozone?

Higher borrowing costs and a weaker currency

Higher borrowing costs and a stronger currency

Equal borrowing costs and a volatile currency

Lower borrowing costs and a weaker currency (correct)

How has the euro been compared to the Deutschemark in terms of strength?

Equally strong

Much weaker (correct)

Slightly weaker

Stronger

What will play the most significant role in determining the future of the eurozone?

Economic indicators

International trade agreements

Central banks' decisions

Politics (correct)

What remains necessary to sustain the eurozone, according to the text?

Closer fiscal and banking arrangements Signup and view all the answers

What did investors perceive about Spanish housing assets due to the perceived elimination of currency risk?

They were a great investment Signup and view all the answers

What was the consequence of capital flows from large savers to capital importers in the Eurozone?

Led to a boom followed by a loss of long-term competitiveness Signup and view all the answers

Why was a single currency believed to be needed following the devaluations of the early 1990s?

To prevent disparate trade shocks from recurring Signup and view all the answers

What made Spanish housing assets an attractive investment according to the text?

Potential for high returns due to economic convergence from the euro Signup and view all the answers

What is a key insight from the case of the eurozone regarding currency unions?

Currency unions can lead to self-reinforcing liquidity crises Signup and view all the answers

What did the European Central Bank do in August to intervene in the eurozone crisis?

Became the central bank for both core and peripheral countries Signup and view all the answers

Which country required dollars post-Lehman Brothers collapse due to firms borrowing in dollars that domestic savers could not fully supply?

South Korea Signup and view all the answers

What role did the European Central Bank take on in relation to distressed peripheral countries?

Acted as a lender of last resort for those countries Signup and view all the answers