UCAT Question Analysis - Verbal Reasoning Question 4
TEXT
The European Economic Community (EEC) was set up in 1957 by the fol-lowing countries: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. The UK joined the EEC in 1973. The Maastricht Treaty of 1993 abolished the EEC and replaced it with the European Union (EU). At the time, the EU comprised the same countries as the EEC, but it now in-cludes 27 independent sovereign countries (also known as member states). The main EU institutions are the European Commission, which resides In Brussels (Belgium), and the European Parliament, which sits in Strasbourg (France). The Euro was adopted as the EU's official currency in 1999, though coins and bank notes were not produced until 2002. Fifteen EU countries, collectively known as the Eurozone, have adopted it. In addition, 11 non-EU countries have also adopted the Euro as official currency, in-cluding Monaco, the Vatican and Andorra. Sweden and the UK have both declined to join the Euro for the time being.
The UK has adopted a "wait-and-see policy'. Arguments in favour of joining the Euro are numerous. By reducing exchange rate uncertainty for UK busi-nesses and tourists, everyone would benefit from lower transaction costs. Adopting the Euro would also encourage greater competition across bor-ders, enabling UK customers to compare prices directly with their neigh-bours and purchase goods accordingly. On the other hand, adopting the Euro would thing its fair share of problems. For a start, UK interest rates would be set by the European Central Bank in Frankfurt (Germany), which sets interest rates for the whole Eurozone. It has long been argued that the UK economy is more in line with US economy than with European economy and that therefore it needs to keep closer links with US interest rates than European interest rates. In December 2008, the Bank of England was able to reduce UK interest rates drastically in an attempt to boost the UK econ-omy; this would not have been possible had the UK adopted the Euro.
With all this in mind, the most powerful argument against the Euro in the UK is the fact that UK citizens are reluctant to relinquish yet more power to Brussels and to lose their identity in an ever-expanding Europe.
Q4.1 Monaco is part of the Eurozone.
❑ True
❑ False
❑ Can't tell
Q4.2 All original EEC countries are currently in the EU.
❑ True
❑ False
❑ Can't tell
Q4.3 All EU institutions are located either in France or in Belgium.
❑ True
❑ False
❑ Can't tell
Q4.4 Neither Sweden nor the UK intend to adopt the Euro.
❑ True
❑ False
❑ Can't tell
Q4.5 If the UK entered the Eurozone, the Bank of England would lose the power to set interest rates.
❑ True
❑ False
❑ Can't tell
Q4.6 The UK would benefit more from adopting the US Dollar as its cur-rency than from adopting the Euro.
❑ True
❑ False
❑ Can't tell
Q4.7 Andorra is not an independent sovereign country.
❑ True
❑ False
❑ Can't tell
Q4.8 If the UK adopted the Euro as official currency then the Bank of England would cease to exist.
❑ True
❑ False
❑ Can't tell
Answer and Explanation
Q4.1 — FALSE.
The Eurozone is defined as the 15 countries from the EU who have adopted the Euro. The text says that, in addition, 11 non-EU countries have adopted the Euro Including Monaco. Therefore Monaco, alt-hough it uses the Euro, is not in the officially-defined Eurozone.
Q4.2 — CAN'T TELL.
Although, if you know your history, you will know that this statement is true, we cannot conclude it from the text. The text tells us that in 1993, the statement was true. For the statement to be true currently, we would need confirmation that none of the original countries have left the EU since 1993. The text does not say arythlng on the matter. It only states that there are now 27 countries but does not list them. Remember to base your conclusions on the text only and not on your general knowledge.
Q4.3 — FALSE.
The first paragraph does state that the main EU institutions are in Belgium and France. However, there are other institutions which re-side somewhere else; in fact the text states that the European Central Bank is in Germany. The statement that all institutions are based in Belgium or in France is therefore false.
Q4.4 — FALSE.
We know that both countries have declined to join the Euro, but that is not an indication of future intention. The first sentence of the second paragraph says that the UK has adopted a wait-and-see policy, which means that it remains open. Therefore the fact that mitt= country intends to adopt the Euro Is incorrect.
Q4.5—TRUE.
The second paragraph states clearly that interest rates would be set by the European Central Bank in Frankfurt. It also later states that if the UK had joined the Euro, the Bank of England would not have been able to reduce interest rates drastically to boost the UK economy.
Q4.6 — CAN'T TELL.
The only mention of the US is in a statement which says that "It has long been argued that the UK economy is more in line with US economy than with European economy and that therefore it needs to keep closer links with US interest rates than European interest rates." There is nothing in the text which suggests that, if two countries have economies which are aligned, they would benefit overall by having a common currency (since the text presents both pros and cons). This Is all speculative and nothing in the text allows us to draw such a definitive conclusion.
Q4.7 — CAN'T TELL.
The text says that the EU includes 27 independent sovereign countries, but this does not mean that there are not any other independent sovereign countries outside the EU. The fact that Andorra is a non-EU country (which the text states) does not mean that it is not an inde-pendent sovereign country. In the absence of any further information, we cannot conclude either way.
Q4.8 — CAN'T TELL.
What the text says is that, should the UK adopt the ELIM, UK interest rates would he set by the European Central Bank in Frankfurt. There is no mention of the Bank of England disappearing (it may be needed to fulfil other roles). However, since there is no mention of the Bank of England remaining either, we cannot conclude either way.
Drafted by Juno Wong(UCAT Prep)