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Monetary Economics Homework 4

Monetary Economics Homework 4 - Dustin Johnston Monetary...

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Dustin Johnston Monetary Economics December 11, 2009 Monetary Economics Homework 4 1a. Great British pound, the name is synonymous with money where ever you go through out the world this might be because it is the worlds single oldest currency still in circulation and it’s the worlds 3 rd largest at that. The term “pound” comes from the amount a “pound sterling” weighs. Historically one pound is the number of silver coins it would take to make up one pound of mass (kind of unusual since today they use the kilogram as the preferred measurement of weight). This weight was originally 240 small silver pennies (pence) which weighed one pound. The only time the pound sterling was not the main currency of the United Kingdom was in the 1800’s during the switch to the gold standard when the sovereign. Bretton woods had little effect on the British pound it was valued at $4.03/£ until the end of WWII when it was revalued at $2.80/£ which caused the rest of the world to revalue their currency relative to the dollar it began floating again in 1979. All monetary policy for Britain is held in their central bank, the Bank of England. http://www.bankofengland.co.uk/ b. The British pound is a semi free float currency, with very little government interference; in fact the British pound is thought to be one of the most freely floating currencies in the world. The pound was valued $4.03/£ at the Bretton Woods agreement, until the end of WWII when it was revalued at $2.80/£ which caused the rest of the world to revalue their currency relative to the dollar. The pound was eventually devalued by 14.3% to $2.40 on 18 November 1967. It began floating again in 1979. On 15 February 1971, the UK decimalized, replacing the shilling and penny with a single subdivision, the new penny. The word "new" was omitted from coins after 1981. Sterling fell sharply after 1980 At its lowest, the pound stood at just $1.05 in February 1985. To this date England and the pound are one of the most controversial groups not to join the European Unions “euro”. A poll over the move from the pound to the Euro in December 2008 of 1000 people suggested that 71% would vote no, 23% would vote yes to joining the European single currency, while 6% said they were unsure. The bank of England’s
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