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Unformatted text preview: dollars into gold. The reason for these events was the fact that the dollar had been operating on a fixed exchange rate and when there became a surplus of US dollars, the dollar became devalued even though its exchange rate was the same. In 2002, twelve European nations gave up their own currency in order to establish a common currency which is called the Euro . Because these countries all use the same currency, they must all have the same interest rates. This eliminates exchange market fluctuations. Also, it creates difficulties when one nation is having economic problems because they cannot raise interest rates to induce foreign investments . A lack in confidence in the Euro led exchange rates to favor the dollar over the Euro until recent years. Overall, the change to the euro has been a success and went very smoothly....
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This note was uploaded on 04/20/2008 for the course ECO 215 taught by Professor Mirimiani during the Spring '08 term at Bryant.
- Spring '08