Question

If a nation merges its currency with another nation to create a single currency, what must it give up?

A) the ability to purchase currency in foreign exchange markets
B) the ability to determine its own nationally-oriented monetary policy
C) the ability to fight recessions and control inflations
D) the ability to sell currency in foreign exchange markets

Answer 1

B, the ability to determine its own nationally-oriented monetary policy.

Step-by-step explanation:

When a country merges its currency with another to form/create a single currency, the nation must give up its ability to make monetary policies with the country.

This is because the creation of a single currency has now joined both countries as one monetarily. For this reason, both nations have to come to an agreement on monetary policies that will apply in both country as soon as there is a currency merger.

Cheers.