Exploring International Payments

1. As a result of the development of North Sea oil fields, Britain switched from importing oil in the 1970s to exporting oil in the 1980s. During the entire period the British pound was floating.

a) What effect should the change in oil trade have had on the price of British pounds in the foreign exchange market?
b) As a result of this change in exchange rate, should British consumers decide to import more or less? Should it have become easier or harder for British businesses to export?
c) If wages are flexible, what would the effect of these changes in part b have been? If wages are not flexible, what are the likely effects on employment of these changes?

2. In 2002 most of Europe completed its transition from national currencies (German Mark, French Franc, Italian Lira) to a single currency, the Euro. Almost everyone agreed that the single currency would make transactions from country to country much easier, and thus encourage commerce. If unified currency was a good idea, why did it take so long for European countries to adopt it?

3. Is there a secret message in the Wizard of OZ? Some economists have suggested that it is actually an allegory for the political discount of the populist era and that there are many references to the dispute about the gold standard. Others think that it is a harmless children's story and the symbolism that some find is accidental. You can find both sides on the internet. Try searching for "Wizard of OZ" "gold standard." Other searches are possible--happy searching. What do you conclude--intentional symbolism or accident?

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