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Common Currency

Discuss the advantages and disadvantages of a common currency(the Euro for example).

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Advantages:

Elimination of exchange-rate fluctuations - Any time either a consumer or a business made a commitment to buy something in a different country in the future (at future prices), they stood the chance of paying much more (or less) than they had planned. The euro eliminates the fluctuations of currency values across certain borders.

Price transparency - Being able to easily tell if a price in one country is better than the price in another is also a big benefit, both for consumers and businesses. With price equalization across borders, businesses have to be more competitive. Pricing still varies, but consumers can more easily spot a good deal -- or a bad one.

Transaction costs - This is particularly helpful for tourists and others who cross several borders during the course of a trip. Before, they had to exchange their money as they entered each new country. The costs of all of these exchanges added up significantly. With the euro, no exchanges are necessary within the Euroland countries.

Increased trade across borders - The price transparency, elimination of exchange-rate fluctuations, and the elimination of exchange-transaction costs all contribute to an increase in trade across borders of all the ...

Solution Summary

Discuss the advantages and disadvantages of a common currency(the Euro for example).

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