Title: Benefits Of Single European Currency - Free Coursework from Essay.uk.com
Headings: Benefits of single european currency
Benefits of single european currency
Examine the potential benefits to European manufactures and consumers of single European currency

Content: secondly, the price at which the traveler purchases foreign currency for domestic currency differs from the price of exchanging back surplus foreign currency. The removal of these transaction costs constitutes a gain from monetary union. Reduce exchange rate costs, no exchange rate costs in making transactions. Costless for a French firm to buy a Germany factory rather than a French one thus allowing firms within the EU to make a wider choice and more diversification decisions can be implemented. As firms would be able to buy from the cheapest price there would be near perfect knowledge as the exchange rate is the same as there is a single currency thus reduce the costs for firms. A single currency makes it easier for consumers to compare prices between 2 different countries and thus can buy from the cheapest source. Greater integration between firms with those in the trades goods sector as increase in supplying to the EU market rather than just the domestic market thus the full economies of scale can be exploited thus a further decrease in price for consumers. As the market size increases the supply would increase to meet the increase in demand as shown in the diagram below the supply and demand was at S1 and D1 respectively as the EU causes 11 markets to integrate into 1 large one. The demand would shift to D2 whilst supply would shift to S2 thus leading to increase in quantity supplied and demanded with little or no change in price.! Lowest costs of production as possible: