European Union

Definition

The European Union (EU) is a political and economic union of 27 member countries located primarily in Europe. It aims to ensure the free movement of goods, services, capital, and people among its member states.

5 Must Know Facts For Your Next Test

1. The euro is the official currency for 19 of the 27 EU member countries, known collectively as the Eurozone.
2. Exchange rates between the euro and other currencies can significantly impact multinational companies operating within or trading with EU countries.
3. The European Central Bank (ECB) manages monetary policy for the Eurozone, influencing interest rates and financial stability.
4. Currency fluctuations in relation to the euro can pose risks for financial managers through transaction risk, translation risk, and economic risk.
5. The EU's single market allows for unrestricted movement of capital, affecting investment decisions and cross-border financial transactions.

Review Questions

• What are some risks financial managers face due to exchange rate fluctuations involving the euro?
• How does the European Central Bank influence monetary policy within the Eurozone?
• What impact does the free movement of capital in the EU have on multinational companies?

Related terms

Eurozone: A group of 19 EU member countries that have adopted the euro as their official currency.

European Central Bank (ECB): The central bank responsible for managing monetary policy for the Eurozone.

Exchange Rate Risk:

The potential for losses due to changes in currency exchange rates affecting international financial transactions.