Premium Essay

To What Extent Do You Agree with the View That the Uk Economy Would Benefit If the Euro Were to Be Adopted at Some Point in the Future

In: Business and Management

Submitted By cackermann
Words 796
Pages 4
Back in 1992, the UK Conservative government was forced to withdraw the Pound from the European Exchange Rate Mechanism (ERM) after they were unable to keep it above its agreed lower limit. However now comes the question of whether or not that was the correct reaction to Black Wednesday since 55% of UK’s exports are already going to Eurozone countries, European tourists can bring more spending power into the UK as mentioned in extract D and in a time of recession, strength seems to come in numbers. Hence the UK could benefit from an adoption of the Euro.

The most controversial issue is that the European Central Bank (ECB) will take over monetary policy if the UK were to join the 17-countries strong zone. The problem with this is the ‘one size doesn’t fit all’ dilemma that would make British interest rates the same as the Eurozone, by increasing it to ensure a low inflation rate, which is a priority in the ECB. Arguably, in the UK, this is at the expense of promoting economic growth and spending since the Bank of England tolerates a higher rate of inflation of 2% with a margin of ¬¬+- 1% because their priority is to avoid a double-dip recession. The interest rates in interest would cause a decrease in the marginal propensity to consume as well as increase loan debts, shown in the diagram with an inward shift in AD, as consumption and investment falls. Although there is also a decrease in Imports, it is marginally smaller than consumption (that accounts for 65% of Aggregate Demand). This leads to a fall in Real National Output, which accounts for growth as well as the price level.

On the other hand, the UK could benefit from the European Single Market, since the Treasury’s official assessment of its five economic tests acknowledged that EMU membership for the UK could enhance productivity by increasing trade flows between the UK and other EU nations and boost...

Similar Documents

Premium Essay

Politics Exam Edinbrugh

...Northern Consortium United Kingdom – Politics Past paper questions for June exam < Module 1 > Section A 1a What are the differences between Public Bills Committees and Select Committees? [5] Public Bills Committee is part of legislative process, whereas Select Committee is part of scrutiny process. In the former committee, the bill is examined by line by line to ensure that its wording and language is clear to allow any amendments on the bill. In the latter committee, there are two departments – governmental and non-governmental. They examine government departments’ expeditures , policies and policies. There are between 16 to 50 members in the PBC who are selected by Committee of Selection whose 7 out 9 members are ships. On the other hand, there are 11 members in the SCs and to eliminate “the conflict of interest, all the members are backbench members who are elected using the Alternative vote system. 2a What are the main functions of Parliament and how well does it perform them? [5] < This question is a 20-mark question > 3a What are the differences between direct and representative democracy? [5] In direct democracy, people are directly involved in decision-making processes, whereas in representative democracy, people elect MPs who will represent and form a government in Parliament. For instance, some qualified members of Athenian society were involved in decision-making and a referendum is a limited form of direct democracy....

Words: 18470 - Pages: 74

Premium Essay

Paperwork

...From the editor: A slowdown in Euro area growth momentum from an already anemic pace, combined with ongoing concerns about deflation risks, has made comparisons with Japan’s so-called “lost decades” Top of Mind. We ask three experts whether the Euro area is set to repeat Japan’s prolonged period of stagnation and deflation: former BOJ Governor Masaaki Shirakawa (unclear, but Euro area recovery requires addressing the underlying problem of economic integration and not its symptom, deflation), GS Chief European Economist Huw Pill (low growth and even some deflation similar to Japan, in terms of outcome if not in terms of causes, are likely in the short term, but – also akin to Japan – a deflationary spiral is not), and LSE Professor Paul De Grauwe (there is a real risk of this outcome or worse unless policies change). We conclude that Euro area economies and assets could escape Japan’s fate but warn that Euro area stagnation would have a greater impact on the global economy than did Japan’s. Inside Interview with Masaaki Shirakawa Former Governor of the Bank of Japan 4 Headed for Japanese-style deflation?...

Words: 18121 - Pages: 73

Premium Essay

Economics - the World Economy

...Economics 2: The World Economy Unit Student Guide Scottish Qualifications Authority Contents 1 2 Introduction to the Scottish Qualifications Authority Introduction to the Unit 2.1 2.2 2.3 2.4 2.5 2.6 3 What is the Purpose of this Unit? What are the Outcomes of this Unit? What do I Need to be Able to do in Order to Achieve this Unit? Approximate Study Time for This Unit Equipment/Material Required for this Unit Symbols Used in this Unit 1 2 2 2 2 3 3 4 5 5 6 7 7 11 18 24 31 37 41 51 60 68 75 DE3H 35 Assessment Information for this Unit 3.1 What Do I Have to Do to Achieve This Unit?...

Words: 28608 - Pages: 115

Premium Essay

Document

...Meaning of LIBOR and what is its significance in the Eurocurrency markets? The benchmark interest rate paid on deposits among banks in the Eurocurrency market is called LIBOR (London interbank offer rate). It’s the world most widely used benchmark for short term interest rates. LIBOR is determined by the supply and demand for funds in the Euromarket for each currency, because participating banks could default on their obligations and the rate paid for Eurodollar deposits in addition to the spread over LIBOR for borrowers. It also help to reduce the cost of using the Euromarket for borrowers. Eurocurrencies are domestic currencies of one country on deposit in a second country. Any convertible (exchangeable) currency can exist in “euro-“ form. Eurocurrency markets serve two valuable purposes: These deposits are an efficient and convenient money market device for holding excess corporate liquidity; This market is a major source of short-term bank loans to finance corporate working capital needs. * The modern Eurocurrency market was born shortly after WW II. Eastern European holders of dollars, including state trading banks in the Soviet Union, were afraid deposit their dollar holdings in the US because they felt claims could be made against these deposits by US residents. These currency holders then decided to deposit their dollars in western Europe. While economic efficiencies helped spurn the growth of this market, institutional events were also important....

Words: 4884 - Pages: 20

Premium Essay

Greece and the Fiscal Crisis in the Emu

...And the problems are not confined even to the Euro Area (EA), but extend to EU member states not in the EA, like the UK and Hungary, and to Japan and the USA. This essay explains how and why this situation came about and how it is likely to evolve during the rest of this decade. While the origins of this widespread loss of fiscal control are shared by...

Words: 10464 - Pages: 42

Premium Essay

Entering the Retail Sector in Central Europe Tesco’s Expansion Into the Czech Republic

...Contents Entering the retail sector in Central Europe Tesco’s expansion into the Czech Republic International Marketing 2006 Séverine Delaporte Ilona Juřenová Lizhu Ren David Towers MIB 21a Entering the retail sector in Central Europe 0 of 25 Contents 1 Contents 1 2 3 4 5 6 7 8 Contents Abstract Introduction to the Central and Eastern European market Trends in the retail industry 4.1 Retail in CEE countries 4.2 Reasons to expand retail abroad 4.3 CEE countries – retailers’ paradise Tesco’s market entry strategy 5.1 Entry modes 5.2 Tesco’s marketing strategy in the Czech Republic 5.2.1 Focusing on customers needs and wants without losing identity 5.2.2 A multi-format strategy: an adapted distribution policy 5.2.3 Local products that fit customers’ tastes 5.2.4 Aggressive pricing strategy 5.2.5 Adapted communication 5.2.6 Adding value through service 5.2.7 Adapting to changes in the macro-environment 5.3 Evaluation of Tesco’s success within the Czech Republic 5.3.1 The Czech success 5.3.2 Problems within the Czech market 5.3.3 The future within the Czech Republic 5.4 Consumer perceptions of Tesco from the UK and the Czech Republic Conclusion Appendix 7.1 Czech Republic Questionnaires 7.2 UK Questionnaires Bibliography Entering the retail sector in Central Europe 1 2 3 5 5 5 6 8 8 9 10 10 11 11 12 12 12 13 13 14 15 15 17 18 18 21 23 1 of 25 Abstract 2...

Words: 8593 - Pages: 35

Premium Essay

Supply and Demand

...If you think they could, give examples. Yes. People could produce things for their own consumption. For example, people could grow vegetables in their garden or allotment; they could do their own painting and decorating. Alternatively people could engage in barter: they could produce things and then swap them for goods that other people had produced. ( Before reading on, how would you define scarcity? Must goods be at least temporarily unattainable to be scarce? See page 2 of text for a definition of scarcity. Goods need not be unattainable to be scarce. Because people’s incomes are limited, they cannot have everything they want from shops, even though the shops are stocked full. If all items in shops were free, the shelves would soon be emptied! ( If we would all like more money, why does the government not print a lot more? Could it not thereby solve the problem of scarcity ‘at a stroke’? The problem of scarcity is one of a lack of production. Simply printing more money without producing more goods and services will merely lead to inflation. To the extent that firms cannot meet the extra demand (i.e. the extra consumer expenditure) by extra production, they will respond by putting up their prices. Without extra production, consumers will end up unable to buy any more than previously. 5 ( (Box 1.1) What is it that makes each one of the above news items an economics item?...

Words: 89665 - Pages: 359

Free Essay

World Economy

...“Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of US policymakers to agree on a fiscal plan surely play an important role, but one that is hard to nail down,” he said. The renewed concern about the health of the global economy marks a depressing return to fear after an initially strong global recovery. World output jumped 5.1 per cent in...

Words: 15731 - Pages: 63

Premium Essay

Multinational Cost Me Capital and Term Structure

...MULTINATIONAL COST OF CAPITAL AND CAPITAL STRUCTURE LEARNING OBJECTIVES The specific objectives of this chapter are to: l explain how corporate and country characteristics influence an MNC’s cost of capital, explain why there are differences in the costs of capital among countries, and explain how corporate and country characteristics are considered by an MNC when it establishes its capital structure. l l An MNC finances its operations by using a mixture of fixed interest borrowing and equity financing that can minimize the overall cost of capital (the weighted average of its interest rate and dividend payments). By minimizing the cost of capital used to finance a given size and risk of operations, financial managers can maximize the value of the company and therefore maximize shareholder wealth. 25 26 MULTINATIONAL COST OF CAPITAL AND CAPITAL STRUCTURE BACKGROUND ON COST OF CAPITAL Apart from working capital, a firm’s capital consists of equity (retained earnings and funds obtained by issuing shares) and debt (borrowed funds). With these funds a firm invests in a portfolio of projects, each project potentially offering different risks and different returns. The interest rate that the firm applies or charges to these projects (the cost of using the firm’s capital) will therefore vary according to the project’s particular risk. Profitable investment in this context is where the firm invests in projects that achieve returns greater than that required by their risk. A......

Words: 19422 - Pages: 78

Premium Essay

European Economic Poicy Sum Up

...It was also a security measure for France with respect to Germany (the historical enemy) as coal and steel are the vital war resources and now were under independent common control. The opening of the programme to other European states was perfectly consistent with the evolution of European relations with respect to the US under the NATO treaty. France, Germany, Italy, Belgium, Luxembourg and the Netherlands signed the Paris treaty and the European Coal...

Words: 15394 - Pages: 62

Free Essay

Gov and Pol

...Edexcel AS Politics Edexcel AS Politics ExamBuster 2009 Introduction to Unit 1- People and Politics Understanding the Examination and Exam Technique Choosing your questions In this unit you are presented with four questions. They are of equal value and each question covers one of the four sections of the specification. These are: Democracy and political participation Party policies and ideas Elections Pressure groups There is no significance to the order in which questions appear. Each question is divided into three sections (a), (b) and (c). When choosing which questions to do, the following principles are recommended: It is almost certain that you will be better off choosing your strongest question to do first. You should choose questions on the basis of how well you can answer the section (c) part. The (c) part carries 25 of the 40 marks available for the whole answer. Do not choose a question simply because you can do part (a) especially well. The (a) question is only worth 5 marks. It would be illogical to choose your strongest (a) part if you cannot do well on section (c). If you cannot decide between several (c) parts, i.e. you can do more than one equally well, make your choice on the basis of part (b) which carries 10 marks. But remember, it is the (c) parts that will determine most what your overall mark will be. So, when you first look at the exam paper, look at the (c) sections first....

Words: 51996 - Pages: 208

Premium Essay

Exorbitant Priviledge

...EXORBITANT PRIVILEGE EXORBITANT PRIVILEGE The Rise and Fall of the Dollar and the Future of the International Monetary System Barry Eichengreen Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education. Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Copyright © 2011 by Barry Eichengreen Published by Oxford University Press, Inc. 198 Madison Avenue, New York, NY 10016 www.oup.com Oxford is a registered trademark of Oxford University Press All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Library of Congress Cataloging-in-Publication Data Eichengreen, Barry J. Exorbitant privilege : The Rise and Fall of the Dollar and the Future of the International Monetary System / Barry Eichengreen. p. cm. Includes bibliographical references and index. ISBN 978-0-19-975378-9 1. Money—United States—History—20th century. 2. Devaluation of currency—United States—History—21st century. 3....

Words: 81879 - Pages: 328

Premium Essay

British Airways

...Some 20 million people live within commuting distance of these airports, on the doorstep of the City of London, the world’s biggest premium travel market. We also operate a worldwide air cargo business, largely in conjunction with our scheduled passenger services. Operating one of the most extensive international scheduled airline route networks, together with our codeshare and franchise partners, we fly to more than 300 destinations worldwide. In 2009/10, we carried nearly 32 million passengers. We support the UK economy by providing vital arteries for trade and investment, meeting the demand for business travel and leisure travel for holidays and family reunion. In 2009/10, we earned £8 billion in revenue, down 11 per cent on the previous year. Passenger traffic accounted for 87 per cent of this revenue, while 7 per cent came from cargo and 6 per cent from other activities. We carried 760,000 tonnes of cargo to destinations in Europe, the Americas and throughout the world. At the end of March 2010 we had 238 aircraft in service. British Airways 2009/10 Annual Report and Accounts 1 2 British Airways at a glance 4 Financial and operational highlights 5 Chairman’s statement 9 Chief Executive’s statement overview 15 Chief Financial Officer’s statement 21 The markets we operate in 27 Our strategy and objectives 32 Our Key Performance Indicators 33 Principal risks and uncertainties 35 Running a responsible business 37 –...

Words: 67567 - Pages: 271

Premium Essay

International Finance

...Sixth Edition INTERNATIONAL FINANCIAL MANAGEMENT Cheol S. Eun Bruce G. Resnick International Financial Management Sixth Edition The McGraw-Hill/Irwin Series in Finance, Insurance, and Real Estate Stephen A. Ross Franco Modigliani Professor of Finance and Economics Sloan School of Management Massachusetts Institute of Technology Consulting Editor FINANCIAL MANAGEMENT Adair Excel Applications for Corporate Finance First Edition Block, Hirt, and Danielsen Foundations of Financial Management Fourteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Tenth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Second Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Sixth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Sixth Edition Chew The New Corporate Finance: Where Theory Meets Practice Third Edition Cornett, Adair, and Nofsinger Finance: Applications and Theory First Edition Cornett, Adair, and Nofsinger Finance: M Book First Edition DeMello Cases in Finance Second Edition Grinblatt (editor) Stephen A. Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Higgins Analysis for Financial Management Ninth Edition Kellison Theory of Interest Third Edition Kester, Ruback, and Tufano Case Problems in Finance Twelfth Edition Ross, Westerfield, and Jaffe Corporate Finance Ninth......

Words: 186186 - Pages: 745

Premium Essay

British Airways

...British Airways Plc Annual Report and Accounts Year ended 31 December 2012 Company registration number: 1777777 This page has been intentionally left blank Contents Officers and professional advisers 1 Business review and Directors’ report Business review Management review Financial review Internal controls and risk management Directors’ report 2 5 8 12 Directors’ responsibilities statement in relation to the financial statements 14 Independent auditors’ report 15 Group financial statements Group consolidated income statement Group statement of other comprehensive income Balance sheets Cash flow statements Statements of changes in equity Notes to the accounts Operating and financial statistics Fleet table Principal investments Glossary Subsidiary undertakings 16 17 18 19 20 21 79 80 81 82 83 British Airways Plc Officers and professional advisers Directors Sir Martin Broughton Alison Reed Keith Williams Nick Swift Andrew Crawley Frank van der Post Enrique Dupuy de Lôme Ken Smart Gavin Patterson Garrett Copeland Julia Simpson Secretary Kulbinder Dosanjh (Chairman) (Deputy Chairman) (Chief Executive Officer) (Chief Financial Officer) Registered office Waterside PO Box 365 Harmondsworth UB7 0GB Parent company International Consolidated Airlines Group S.A. Calle Velázquez 130 Madrid, 28006 Spain Independent auditors Ernst & Young LLP 1 More London Place London SE1 2AF 1 British Airways Plc Business review and Directors’......

Words: 42054 - Pages: 169