All economies in the world agreed to use single currency

Assignment Help Macroeconomics

Reference no: EM132311921

Suppose that all economies in the world agreed to use a single currency that would be managed by an independent organization. What would the advantages and disadvantages of this be?

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Valerie:

Having multiple currencies is a little confusing and I could see some benefits to it as well as the disadvantages. My personal opinion however is that it is impractical and would do more harm than good.

A single global currency could eliminate transaction costs. This would affect both ordinary citizens planning to spend money in other countries while traveling and multinational companies pursuing international transactions. This would eliminate the inconvenience of transaction fees when exchanging currencies for when traveling abroad and international transactions would increase.

A disadvantage would be that countries would lose the ability to control their own financial policy. To ensure a stable economy, central banks will increase or decrease their economy by adjusting interest rates. The biggest disadvantage would be that countries that do not do well financially would cause strain for the rest of the world because other countries would have to use their resources to help stabilize that type of situation.

Reference no: EM132311921

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