&8226;Look at the statements below and the 5 passages about the European Monetary System.&

&8226;Look at the statements below and the 5 passages about the European Monetary System.

&8226;Which passage (A, B, C, D or E) does each statement 1-8 refer to？

&8226;For each statement 1--8, mark one letter (A, B, C, D or E) on your Answer Sheet.

&8226;You will need to use some of these letters more than once.

A

The European Monetary System (EMS) has, since its inception in 1979, provided a fascinating example of policy coordination in practice. As concern about exchange-rate instability and global economic imbalances has grown, both academic researchers and policymakers have looked to the EMS for lessons about cooperation on a wider scale. European Monetary System, arrangement by which most nations of the European Union (EU) linked their currencies to prevent large fluctuations relative to one another, was organized in 1979. to stabilize foreign exchange and counter inflation among members.

B

Periodic adjustments raised the values of strong currencies and lowered those of weaker ones, but after 1986 changes in national interest rates were used to keep the currencies within a narrow range. In the early 1990s the European Monetary System was strained by the differing economic policies and conditions of its members, especially the reunified Germany, and Britain permanently withdrew from the system. In 1994 the European Monetary Institute was created as transitional step in establishing the European Central Bank (ECB) and a common currency.

C

The ECB, which was established in 1998, is responsible for setting a single monetary policy and interest rate for the adopting nations, in conjunction with their national central banks.

Later in 1998, Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain cut their interest rates to a nearly uniformly low level in an effort to promote growth and to prepare the way for a unified currency. At the beginning of 1999, the same EU members adopted a single currency, the euro, for foreign exchange and electronic payments.

D

The introduction of the euro (worth about $1.17 at its inception) four decades after the beginnings of the European Union was widely regarded as a major step toward European political unity. By creating a common economic policy, the nations acted to put a damper on excessive public spending, reduce debt, and make a strong attempt at taming inflation. The European Currency Unit (ECU), which was established in 1979, was the forerunner of the euro. Derived from a basket of varying amounts of the currencies of the EU nations, the ECU was a unit of accounting used to determine exchange rates among the national currencies.

E

Of the European Union members not adopting the euro (Denmark, Great Britain, and Sweden), perhaps the most notable is Britain, which continues to regard itself as more or less separate from Europe. Nonetheless, British Prime Minister Tony Blair announced plans to consider adopting the euro sometime in 2002-5. In all three nations there was strong public anxiety that dropping their respective national currencies would give up too much independence. Euro coins and notes were introduced into circulation in January, 2002, and local currencies were removed from circulation by July of that year.

Some member nations' specific strategy in economy made the System under pressure.