-Increased UK Price levels make UK exports less competitive.
-Higher prices mean lower Exports.
-(X-M) decreases.
-Lower Unemployment means higher Inflation (travel from point A to Point B).
-As long as workers suffer the Money Illusion, inflationary expectaions don't change (i.e. stay at 2%).
-Inflation erodes nominal wage gains,
-Membership of a monetary union implies a country is disciplined.
-The monetary union (such as the Eurozone) may mean that the country is more likely to be bailed out in a crisis (e.g. by the ECB)
-This makes the country appear less risky to debt markets.
-Increased willingness to lend money will lower the country's bond yields.
The Inelastic section: where the economy is at full capacity (full employment)
The AD curve.
A limit on imported supply will push up the domestic price (same as a tariff would)
-Must pay into EU budget
Sovereignty Issues:
-Must abide by EU laws
-No ability to control immigration
-No ability to strike other trade deals
-Multinational Companies
-Liberalisation of Trade
-Improved Transport Links (cargo containers)
-International Flows of Capital
-The internet
-Increased access to EU market gives export opportunities
-Need to adhere to EU government standards will help clean up government corruption
-Benefit from EU trade deals with rest of the world
-Access to EU structural funds
-Movement of labour means citizens may leave and send remittances home
-Joining the EU would attract FDI
