Compared to a system of fixed exchange rates,currency unions are beneficial because they
A)allow exchange rates to float.
B)allow every country to have an independent monetary policy.
C)reduce the costs of trading goods and assets.
D)restrict what countries can do with fiscal policy.

Question

Quizplus · Accepted Answer

Currency unions eliminate transaction costs associated with currency exchange, thereby reducing the costs of trading goods and assets. Compared to fixed exchange rates, currency unions do not allow exchange rates to float and countries in a currency union cannot have an independent monetary policy. However, they do not restrict what countries can do with fiscal policy.

Compared to a System of Fixed Exchange Rates,currency Unions Are