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Mexico would lose its sovereignty

Essay Question Key: A & C – Please list two benefits of the Euro (up to 25 words). 1. Firms and individuals should save by handling one currency, rather than many 2. Consumers should find it easier to compare prices across Europe 3. Producers should become more efficient as they reduce their production costs in order to maintain their profit margins 4. The highly liquid pan-European capital market should get a strong boost 5. The range of investment options open both to individuals and institutions should increase B & C – Please list two benefits of NAFTA (up to 25 words). 1. Mexico will benefit from increased jobs as low cost production moves south, and will attain more rapid economic growth as a result 2. The U.S. and Canada will benefit from the access to a large and increasingly prosperous market and from the lower prices for consumers from goods produced in Mexico 3. U.S. and Canadian firms with production sites in Mexico will be more competitive on world markets B & D – Please list one cost of the Euro (up to 25 words). 1. Membership in the euro zone implies that nations lose control over the monetary policy 2. The European Central Bank (ECB) was established to manage monetary policy, but some question its ability to act independently 3. The EU is not an optimal currency area (an area where similarities in the underlying structure of economic activities make it feasible to adopt a single currency and use a single exchange rate as an instrument of macro-economic policy) 4. So, countries may react very differently to changes in the euro A & D – Please list two drawbacks of NAFTA (up to 25 words). 1. Jobs could be lost and wage levels could decline in the U.S. and Canada 2. Mexican workers could emigrate north 3. Pollution could increase due to Mexico’s lax standards 4. Mexico would lose its sovereignty

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