European Union and Currency

European Union and Currency

The EU

• The purpose of the EU is for its members to work together for

  advantages that would be out of their reach if each were

  working alone.

• The EU believes that when countries work together they are

  
  

  a more powerful force in the world because they involve:

  
  

  –more money, more people, and more land areas.

• This helps make small countries more competitive in the

  world market.

What is the Big DEAL???

• The European Union does NOT handle all the government business for the members. (It is a confederation.)

  
  

  
  

• Each country still makes its own laws, has a military, and elects its leaders.

Multiple Choice

True or False:

The European Union handles all the government business between all of its memebers.

• True

• False

Member Benefits

• Members may use a common currency (euro) that makes trade easier.

• EU works to improve trade, education, farming, & industry among its members

• 1. No tariffs (taxes) among member countries – free trade zone

  2. Citizens of one country can move freely to another country

  3. Citizens can live and work in any other EU nation

  4. Citizens can vote in local elections even if they aren’t citizens of the country

The Euro

• •The euro is the currency of MOST EU countries.

• •Member countries can choose to give up their own currency and exchange them for euros. (For example, French francs and German marks have been replaced by the euro.)

• •A common currency makes trade between the countries much easier and less expensive.

• •12 countries in the EU do not use the euro. (For example, the United Kingdom has decided to continue to use the British pound.)

Non Members

There are several countries that are NOT EU members, including Turkey, Switzerland, Iceland, & Russia.

WHY?

1. Turkey’s culture (98% Muslim), stability, and location to the Middle East causes some EU members to not want Turkey to join.

2. Switzerland has one of the world’s highest standards of living and prefers its economy to not be regulated under the EU.

Non Members

3. The EU has strict limits on the fishing industry, and Iceland does not want the EU’s control on its most important economic activity.

4. Russia prefers to be an independent world leader over its resources and economy

Why is it necessary to exchange currencies in order for nations to trade?

Countries trade because....

• no country has all of the resources it needs to provide for its people.

• Moreover, every country has different resources.

Open Ended

What are resources?

Voluntary Trade

Voluntary Trade happens when both countries expect to gain from the trade.

The “buyer” country receives goods and the “seller” country makes money.

Multiple Choice

Why do Countries trade?

• no country has all of the resources it needs to provide for its people.

• Countries trade because they like Money.

• All countries want to be friends with each other.

Open Ended

In your OWN words What is voluntary trade?

International Trade & Exchange Rate

• International trade involves countries from all over the world engaging in voluntary trade.

  
  

  
  

• Exchange rates provide a procedure for determining the value of one’s currency in terms of another’s currency.

  
  

Open Ended

How would trade be affected if there were no system for exchanging currency?