The benefits of a common currency essay

what are the advantages and the disadvantages of having single currency worldwide ielts essay

They are also created to look after the local selling from economical competitive merchandise by the government.

Also, the transport and treatment will cost about 5 dollars per pants. Firms will incur lower costs of production as a result of the elimination of transaction costs, making export and import markets more efficient.

benefits of international currency

The same happens as the central bank is not only managing the value of the currency but also the inflation rate which will be set for the union as a whole and not for every individual state, so some member states will have difficulties with having too high inflation rates while others will suffer from too low inflation rates BBC, Hedging and speculation activities can be used against various types of risks faced by companies including those associated with interest rates, costs of commodities, and currency exchanges It is widely known that Europe had experienced that price discrimination before the most countries of Europe adopt as a common currency Euro and the reason was the segmentation of national markets.

It is possible that these are positive but it might turn out negatively as well Baldwin, Wyplosz, Some profits could be lost by UK firms, but consumers could benefit.

These advantages might even lead to a greater potential for growth BBC, Despite the benefits, the EU has caused countries to expend a high amount of money on the membership and it has also lead to overpopulation and inequality between big and smaller countries.

Financial derivative securities are used by many businesses to protect against risks or to profit from them.

Disadvantages of single currency

The motion for its creation was introduced in and affirmed in , in EU summit in Hague The second one is that the decrease of exchange rate uncertainty may not reduce the systemic risk. An example for this would be the situation in the EU at the moment, as strong countries have to pay for the failing weak countries. There are two extreme exchange rate regimes that is 1 the fixed exchange rate, which means that the exchange rate does not change due to economic changes and 2 there is a freely floating regime that means that the exchange rate is changing constantly due to economic changes. The second characteristic is that countries forming an optimum currency area should have widely diversified production and exports as well having a similar structure to the other countries in the union Baldwin, Wyplosz, As a result, firms that deal with a greater monetary zone may not on average operate in a less risky environment. Contrary, when there is an unfavorable exchange rate the firm does not think about taking that option. To be more specific, this elimination is responsible for the reduction of the scope for price discrimination between national markets. If everything is in the same currency, price comparison is straightforward. These gains in efficiency come from either the elimination of transaction costs, which is associated with the exchanging of national moneys, or the elimination of risk due to the uncertain future movements of the exchange rates.
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