A geographic region in which the benefits of having a common currency exceed the costs is
A) an optimum currency area.
B)an exchange-rate mechanism.
C)a currency board area.
D)a common currency area.

Question

Quizplus · Accepted Answer

An optimum currency area is a geographic region in which the benefits of having a common currency exceed the costs. This means that the region must have a high degree of economic integration, flexible labor markets, and similar business cycles. Additionally, it must have a low degree of factor mobility, meaning that labor and capital cannot easily move between regions to adjust to economic shocks. Only in these circumstances will a common currency provide greater benefits than having independent currencies with flexible exchange rates.

A Geographic Region in Which the Benefits of Having a Common