European Monetary Union

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European Business: Assessment 2- European Monetary Union        23/04/2008

European Monetary Union

                                                                                                                                                                                                                                                                                                                                                                                                                          United Kingdom has decided not to join the Euro zone under the condition of the five economic test not favouring the British national in terms of jobs, business and future prosperity. The ex Chancellor of the Exchequer Gordon brown who is the creator of this five economic test, made a statement that not joining the Euro zone is the right decision for Britain and Europe. I will analyse this statement in this essay and back it up with evidence. I will also analyse the role of currency and exchange rates in European business and trade. Furthermore I will evaluate Britain’s approach to the European Monetary System and whether the creation of the Euro was inevitable. At last, I will asses the likelihood of Britain going into the Euro.

Money is a medium exchange which allows the value of the goods or services to be replaced with currency. Money is also known as a store of value, it is obliged to be reliably saved and to be regained when needed. People also refer to money as differed payment which contrasts to for example, a contract given to a footballer, the payments will be made in arrears. Unit of account is also an essential function of money. It is a standard monetary unit of the cost of goods and services. Currency is an important role in European business and trade. As goods and services is exchanged in return of money. The role of currency is important, as when inflation takes place other countries will be less attracted to export goods to your country. And this will make the purchase power less sustaining. And business will imply to move to other countries where the currency is strong. People also are unlikely to invest in a British bank when the currency declines.

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Exchange rate is the value of one currency compared to one another. The exchange rate is primarily related to the European Business and trade. As each business trades in return of money. The value of the exchange rate will have an impact on the European business as the rate is not stable and this will lead to an unpredictable business environment. If the environment is unpredictable then you can’t make a budget upfront to see whether the business is making any profit. However the Exchange Rate Mechanism sought to maintain it’s stability between the EU states. The currency becomes ...

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