Principles and Applications of Macroeconomics

Principles and
Applications of
Macroeconomics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................5
Description of Methodology...................................................................................................5
Background of the UK economy............................................................................................6
Review of major opinions and predictions around BREXIT.................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
The EU was formed by Maastricht Treaty which was enforced on November 1,1993. the
primary aim of this treaty was to improve economic and political integration in Europe by
creating a single currency, a united foreign security policy, common rights related to citizenship
and increasing collaboration between members of the EU in several matters such as immigration,
asylum and cases related to the judiciary. The EU comprises of 27 member countries and nations
which fulfil Copenhagen criteria are able to apply for EU membership. The Copenhagen criteria
includes a free market economy, stable democracy, rule of law, adoption of EU legislation which
includes usage of euro as national currency (Coppock and Mateer, 2017). 27 Commissioners of
European commission are proposed by council of EU based on the recommendation of
governments of EU membranes which are appointed after gaining approval from European
parliament. Members of the EU commission stand for common interests of EU instead of
national interests of their country. UK became a part of European communities which would
become EU as a result of Maastricht and Lisbon treaties after the ratification of ascension treaty
in 1973. UK aimed to join the European Union as remedy to economic failures and enhance
political power across Europe. Fear of isolation in western Europe influenced UK decision to
join EU (Why did the UK join the EU?, 2019). UK refused to accept euro as their national
currency after joining EU because it failed to meet with the fire tests policy which needed to be
fulfilled in order to accept euro as the national currency.
Britain joined the Organization for European Economic Co-operation or OEEC in the
year 1961. After doing so, the country worked significantly towards reducing the trade
restrictions between the members. Britain did not adopt the euro currency and instead uses the
British Pound because the government of the country has determined that the euro currency does
not meet the five necessary tests that are required to use it. The five tests include that the
business cycles as well as the economic structures must be compatible enough so that the UK
could live with the interest rates of the Eurozone (Cristina Terra, 2019). Apart from this, it is
necessary that adopting the euro must create conditions that are conducive to both individuals as
well as firms that invest in the United Kingdom. If the euro is adopted, it must promote
economic growth of the country and an increase in the job. It is important that the system must