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If Two Countries Allow People to Move Freely Between Them to Find

Question 13

Multiple Choice

If two countries allow people to move freely between them to find work and housing and also have integrated capital markets in terms of rules, regulations, and structures, what are the other two components they need in order to be an optimal currency area (according to Mundell) ?


A) They need a common central bank and a common language.
B) They need a common central bank and wage and price flexibility to adjust to shocks that hit.
C) They need a shared economic history and wage and price flexibility to adjust to shocks that hit.
D) They need wage and price flexibility and coordinated fiscal policies so one economy does not run a significantly larger deficit than the other.

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