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No more trying to work out prices when buying things from mainland Europe! Sounds like a dream!

The Eurozone also has a floating exchange rate. Although lots of countries use the Euro, they act as one and the value of the euro is the same in every country. All the economies of the countries in the Eurozone are somewhat aligned, to maintain the value of the currency among the different countries. The European Central Bank is responsible for implementing monetary policy across the whole of the Eurozone, which means it sets the base rate that other banks can borrow at.

This has to be the case to maintain the common currency because if interest rates differed from country to country, investors would all want to deposit their money in the countries with higher interest rates.

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Therefore, the monetary policy enforced by eurozone countries is identical and this helps to maintain the value of the currency across countries. As of , these criteria included: proof of controlled inflation; avoidance of excessive government budget deficit; exchange rate consistency and constant interest rates. Despite the challenging steps the UK would have had to make to use the common currency, many academics supported the idea of the UK joining the Eurozone. There seems to be three key arguments put forward for this. This would be due to people no longer having to exchange currency.

This benefit, although questioned since transaction costs are often cancelled out by the exchange rate anyway, would be continuous. This generates huge risks with regards to multimillion-pound investments, where profits may depend partially on the exchange rate.

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Not to mention, it could make your holiday a lot more expensive! Joining the Eurozone would mean this exchange rate risk between the UK and Eurozone would be eliminated. And finally, if the UK did join the Eurozone, there would have been more transparency with prices. We would no longer have to use the exchange rate to compare prices in pounds and euros. Anyone could easily see how the price of a good produced in France compared with the price of the good in the UK.

These three arguments are the main reasons some Economists, including Willem Buiter, believe that joining the Eurozone would have been beneficial to the UK. But other than the sheer cost of physically changing every single pound coin and bank note from one currency to another, what concerns have there been? If the UK were to join the Eurozone, the government would have to maintain the value of euros so that it remained in line with other countries.

This would result in as mentioned above the UK government, just like all the other Eurozone governments, losing control of their monetary policy. One of the ways it achieves this is by altering the interest rate. With the European Central Bank setting inflation targets and interest rates for the whole of the Eurozone, what would happen if either of these rates did not suit the UK?

As you can see, although the general movements of the rates are somewhat aligned for example, both rates were reduced significantly after the Financial Crisis , the Eurozone interest rates have differed from the UK rates. Loss of control over its own base rate could therefore be very detrimental to the UK economy.

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Another interesting issue would be that the UK would lose the ability to issue debt in its own currency. Imagine this hypothetical situation. The UK has joined the Eurozone.


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You are an investor and you believe that the UK government may default. You would sell your UK government bonds and take your Euros to another country, lowering the liquidity of the UK government. This would result in the government defaulting as they cannot simply demand the European Central Bank prints more money for them.

Which choice best completes the sentence? The UK's taxable wealth would decrease if it assisted impoverished countries. Economic independence from impoverished countries would still be possible. The UK would take on significant economic risk if it adopted the euro as its currency.

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Euro adoption would require subsequent economic assistance on the UK's behalf. For many reasons, C.


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For many reasons. Which choice best summarizes details that support the main claim in this paragraph? The UK wants to maintain the pound as its currency. All EU members may soon have to accept the euro.

SAT Writing and Language Practice Test: The UK and the omtaconlustfrac.cf

The UK faces a difficult decision regarding its EU membership. All member nations want to ensure the success of the EU. Which sentence is least relevant to the central idea of this paragraph? Sentence 1 B. Sentence 2 C.

Sentence 3 D. Sentence 4 Or, C.