Which of the following can be considered a disadvantage of a Monetary Union?

A Monetary Union involves a group of countries that share a common currency and monetary policy. While there are several advantages to this setup, such as increased trade volume and lower operational costs due to reduced currency exchange risks, one significant disadvantage is the loss of control over individual national monetary policy.

When countries enter into a Monetary Union, they relinquish control over their individual monetary policies to a central authority (such as the European Central Bank in the case of the Eurozone). This means that member countries no longer can set interest rates or implement monetary policies that respond specifically to their unique economic conditions. For instance, if one country is experiencing economic downturns while another is thriving, the central monetary policy may not adequately address the differing needs of each country. This can lead to situations where a member state struggles economically due to the broader monetary policy that may not align with its specific circumstances.

This loss of autonomy can create tension within the union, especially during economic crises when countries may feel they cannot respond effectively to local economic challenges. Thus, the correct choice highlights a critical issue faced by countries in a Monetary Union.