According to the theory of optimum currency areas,a currency area has the least chance for success when:
A) Countries of the currency area have differing business cycles
B) Workers have a high degree of mobility across borders of the currency area
C) Prices and wages can be adjusted in response to economic disturbances
D) A single monetary policy affects all member countries in the same manner

Question

Quizplus · Accepted Answer

The theory of optimum currency areas suggests that for a currency area to be successful, countries within the area should have similar business cycles. This helps to ensure that monetary policy is beneficial to all countries within the area. When there are differing business cycles, a single monetary policy may not be suitable for all countries, leading to economic instability and potentially undermining the success of the currency area.

According to the Theory of Optimum Currency Areas,a Currency Area