How much trade do currency unions create?
What will be an ideal response?
The main result is that currency unions promote trade. One study found that on average, two countries that are members of the same currency union trade three times as much with each other as countries that do not share a currency. Even if the euro were to raise trade within the euro zone by 50 percent, the positive effect on people's welfare could be immense, as another study has shown. However, some challenge the conclusion. Some claim the results would not be duplicated when applied to large countries such as the members of the EU; another study found out that leaving a common currency area as Ireland did has not caused reduction in UK-Ireland trade.
You might also like to view...
Which of the following would increase the level of planned real investment?
A) an expectation of higher future profits B) an expectation of higher future costs C) an increase in business taxes D) an increase in the interest rate
Assume that the riskiest individuals in a given population are the ones most likely to apply for health insurance. In this situation a provider of health insurance faces the problem of ________
A) moral hazard B) opportunity costs C) tertiary impedence D) adverse selection