What problem does fiscal policy face in a currency union?

1. A Option A: Governments of the member countries of the currency union may run large budget deficits and so crowd out private investment
2. B Option B: Governments of the member countries of the currency union may run large budget deficits and so impose costs on other countries by pushing up interest rates on the bonds these countries’ governments issue
3. C Option C: It is difficult to raise enough tax revenue to pay for the operation of the currency union
4. D Option D: The central bank controls interest rates on long-term bonds issued by the governments of the member countries of the currency union

Answer checked 11 October 2026 · How we write and check questions