Membership of a monetary union

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Membership of a monetary union

Advantages

  • STABILITY - stability of Exchange and interest rates
  • PRICE TRANSPARENCY - comparing prices
  • TRANSACTION COSTS - charges for changing currency
  • MACROECONOMIC MANAGEMENT - ECB controls EU

Disadvantages

  • LOSS OF DOMESTIC MP - domestic monetary policy
  • LACK OF FISCAL TRANSFERS
  • VARIABLE DEBT IN UK
  • LABOUR MARKET FLEXIBILITY
  • LOSS OF SOVEREIGNTY

Evaluation

Do the benefits outweigh the costs? Depends on Magnitude and Elasticity (See flashcards)

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