Two neighboring countries have the same wage rates, tax regimes, and business cycles. In addition, the two countries have reacted similarly to past economic shocks. These two countries can adopt a common currency because they form a(n)

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An optimal currency area is a region where it is economically most efficient to have the entire region share a single currency, due to similarities in economic structures and policies, such as wage rates, tax regimes, and business cycles.

Two Neighboring Countries Have the Same Wage Rates, Tax Regimes