What encompasses the central banks of the eurozone and the ECB?

The term that encompasses the central banks of the eurozone and the European Central Bank (ECB) is the Euro System. This is the monetary authority in the eurozone, and it comprises the central banks of the member states that have adopted the euro as their official currency. The Euro System operates under the framework of the European Union, specifically facilitating the implementation of monetary policy, managing foreign reserves, and ensuring financial stability across the eurozone.

The Euro System plays a critical role in maintaining price stability in the euro area. It is responsible for setting interest rates and engaging in open market operations to control the money supply. This structure is central to the functioning of the eurozone's economy, as it enables coordinated policies that benefit all member countries using the euro.

In contrast, while the other options reference collective economic and monetary arrangements, none specifically define the formal structure that includes both the ECB and the national central banks within the eurozone framework. For example, the European Monetary Area refers to a broader economic arrangement, while terms like Eurozone Alliance and Common Currency Union are not officially recognized and do not encapsulate the specific entities involved. Therefore, the Euro System accurately identifies the component made up of the eurozone's central banks and the ECB.