Evaluate the possible economic effects of the introduction of a single currency by a trading bloc.

Mark Scheme......(evaluative comments in italics)

Effects include:

Elimination of transactions costs

But these are usually only a small proportion of GDP.

Price transparency.

But price differences are likely to remain because of differences in costs.

Easier trading for firms within the trading bloc.

But many of the countries with fastest growing exports are not members of trading blocs.

Loss of independent monetary policy

But greater macroeconomic stability.

Loss of exchange rate flexibility against other countries win the bloc, but greater certainty and stability.

Transition costs.