Explain the theories as to why the single currency was implemented quickly
What will be an ideal response?
One explanation is that EU leaders believed that the potential gains were large and that the potential costs would lessen as countries became more integrated. Another explanation is that EU leaders were swept up in the excitement of the SMP and wanted to push further integration. A third explanation is that German reunification caused anxiety in some European capitals and this was a strategy to tie Germany ever more deeply into a pan-European project. One of the most widely voiced explanations is that the single currency became necessary after the removal of capital controls that took place under the SMP. Before 1990, many countries had controls on the movement of foreign exchange into their country. The removal of these controls made it easier to speculate in foreign currency markets, which is part of what led to the problems in the early 90s. Creation of a single currency reduces the frictions arising from competitive devaluations and issues of fluctuating exchange rates due to speculation.
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The welfare impact of a preferential trade agreement depends on the difference between the amount of new trade that takes place because of the agreement and the change in international trade patterns that arises because of it
Indicate whether the statement is true or false
In a fully contestable market, a monopoly firm's profits are
a. limited to a competitive level b. negative c. higher than a competitive market d. set by a regulatory commission e. not affected by the firm's costs
Centrally planned economies like China produce relatively little pollution.
Answer the following statement true (T) or false (F)
Of the three motives for the demand for money recognized by John Maynard Keynes, which one is very sensitive to changes in interest rate?
A. Transactions B. Medium of exchange C. Speculative D. Precautionary