Question Details

Potential Effects if the United Kingdom Adopted the Euro 



1. Potential Effects if the United Kingdom Adopted the Euro. The U.K. still has its own currency,
the pound. The pound- interest rate has historically been higher than the euros interest rate. The
U.K. has considered adopting the euro as its currency. There have been many arguments about
whether it should do so.
Use your knowledge and intuition to discuss the likely effects if the United Kingdom adopts the
euro. For each of the 10 statements below, insert either INCREASE or DECREASE and complete
the statement by adding a clear short explanation (perhaps one to three sentences) of why the
U.K.- adoption of the euro would have that effect.
To help you narrow your focus, follow these guidelines. Assume that the pound is more volatile
than the euro. Do not base your answer on whether the pound would have been stronger than the
euro in the future. Also, do not base your answer on an unusual change in economic growth in the
U.K. or in the euro zone if the euro is adopted.
2. Invoicing Policy to Reduce Exposure. Celtic Co. is a U.S. firm that exports its products to
England. It faces competition from many firms in England. Its price to customers in England has
generally been lower than those of the competitors, primarily because the British pound has been
strong. It has priced its exports in pounds, and then converts the pound receivables into dollars.
All of its expenses are in the U.S. and are paid with dollars. It is concerned about its economic
exposure. It considers a change in its pricing policy, in which it will price its products in dollars
instead of pounds. Offer your opinion on why this will or will not significantly reduce its
economic exposure.




Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help