Chapter 20: Problem 20

Which statement is the most accurate? (LO3) a) Since the euro was introduced it has lost almost half its value. b) The euro has facilitated trade among the members of the euro zone. c) The euro is now the world's most important reserve currency. d) The euro circulates as currency in most of the countries of the world.

Short Answer

Expert verified

The most accurate statement is (b) "The euro has facilitated trade among the members of the euro zone."

Step by step solution

Analyze the first statement

"Since the euro was introduced it has lost almost half its value." To assess this statement's accuracy, we should know the history of the euro's exchange rates and variations compared to other currencies and its initial value. However, such a significant loss of value would be noticeable and it is unlikely that an official currency could lose almost half of its value without major economic consequences in the eurozone. Therefore, this statement is likely inaccurate.

Analyze the second statement

"The euro has facilitated trade among the members of the euro zone." The euro was introduced to facilitate transactions and create a single market among eurozone countries. It can be assumed that it made these transactions easier due to one common currency among the members. Therefore, this statement seems to be accurate.

Analyze the third statement

"The euro is now the world's most important reserve currency." The statement should be evaluated based on the current status of the euro's importance as a reserve currency in comparison to other currencies. The US dollar is widely considered to be the most important reserve currency in the global market. While the euro holds some significance as well, it is not the most important reserve currency. Thus, this statement is not accurate.

Analyze the fourth statement

"The euro circulates as currency in most of the countries of the world." The euro is the official currency in the eurozone, which consists of 19 European Union member countries. The statement's accuracy should be based on a comparison of the number of countries using the euro compared to the total number of countries in the world. With only 19 countries using the euro, it can't be considered circulating in most of the countries. Hence, this statement is inaccurate.

Identify the most accurate statement

Based on the analysis of each statement, option (b) "The euro has facilitated trade among the members of the euro zone" appears to be the most accurate among the given choices.

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