ECON 2020 Lecture Notes - Lecture 28: Greek Drachma, Exchange Rate, West Germany
Document Summary
Increase trade with a single currency: elimination of tariffs and quotas, no currency conversion or risk, encourage the movement of labor, but not a political union, interest rates targeted by ecb. Stability criteria: an eurozone country"s domestic budget de cit may not exceed 3% of that nation"s. Gdp: stability criteria limits de cits and debt from a country that would require other countries to bail out. Productive labor force and industry: east: German uni cation allows for the production of high quality products at a lower cost. Greece and germany: before the euro, greece - drachma, germany - mark. !1: start with equal prices of german and greek goods to greek consumers. In general, greek consumers prefer higher quality german imports. Monday, april 25, 2016: greece has a current account de cit with germany, exchange rate effect. As supply increases of drachma, drachma depreciates: drachma depreciation increases price of import from germany.
