E.U.

Question 1

what is the council of ministers

Answer 1

institution which decides on all major laws and policy changes, made up of ministers from each member state

Question 2

what is the commission

Answer 2

institution that represents the interests of the EU as a whole and is responsible for ensuring that EU laws and policies are carried out, proposing or starting new legislation and measures

Question 3

what is the European Parliament

Answer 3

751 members elected by the people in each member state, responsible for discussing and making recommendations about new laws

Question 4

what is the court of justice of the European Community (ECJ)

Answer 4

supreme court of justice for cases that involve community law

Question 5

how many members of the eurozone

Answer 5

19 of the 28 members of the European union

Question 6

what is the European central bank (ECB)

Answer 6

central bank for Europe’s single currency

Question 7

what are the functions of the ECB

Answer 7

keep inflation below (but close to) 2%
define and implement monetary policy
support economic policies of eurozone members

Question 8

single market d

Answer 8

removal of obstacles, (such as customs checking) to allow the free movement of goods, services, capital and persons through the area

Question 9

what are the benefits of the single market

Answer 9

economies of scale
dynamic efficiency (inefficient lose market share)
emergence of cheap airlines and electricity
reduction in export bureaucracy
freedom of travel

Question 10

what are the costs of the single market

Answer 10

some domestic firms may be unable to compete
still work in progress (gaps in areas such as intellectual property rights)
services sector has opened up more slowly

Question 11

trade deflection d

Answer 11

redirection of international trade due to the formation of a free trade area

Question 12

what is a free trade area

Answer 12

members eliminate trade barriers between themselves but continue to operate barriers against non-members

Question 13

trade creation d

Answer 13

an increase in international trade that results from the reduction in tariff barriers

Question 14

can you show trade creation on a diagram

Answer 14

yes, the domestic demand and supply, price with tariff, and lower customs union price

Question 15

what is trade diversion

Answer 15

when, after joining a union, a country has to buy goods from a higher cost producer inside the union due to the common external tariff

Question 16

how do you show trade diversion on a diagram

Answer 16

domestic demand and supply, world price and higher EU price with tariff

Question 17

what type of currency is the euro

Answer 17

free floating (sometimes managed)

Question 18

what type of currency is sterling

Answer 18

free floating

Question 19

what is the stability and growth pact

Answer 19

a pact that limits the pubic sector borrowing of participating countries to 3 % of GDP

Question 20

what are the potential benefits of a single currency

Answer 20

reduced transaction costs
reduced exchange rate uncertainty
increased competition
increased FDI
lower interest rates (government failure less likely because of the ECB)

Question 21

what are the potential costs of a single currency

Answer 21

loss of independent monetary policy

loss of sovereignty

Question 22

what is the problem with the UK not having control over its monetary policy

Answer 22

ECB unlikely to attach same importance to unemployment (Phillips curve)
single policy by ECB might affect some countries more than others
too deflationary

Question 23

what are the 5 tests that Britain would have to pass before joining the EMU

Answer 23

economic convergence (aligning business cycles)
flexibility to cope with economic shocks
investment in the UK
effect on the financial services industry
effect on UK employment and growth