According to the theory of optimum currency areas,
A)the relevant criterion for identifying and designing a common currency zone is the degree of factor (i.e.,capital and labor)mobility within the zone.
B)exchange rates should reflect the degree to which workers are willing to move to get a better job.
C)exchange rates are determined by portfolio managers seeking the highest return.
D)none of the options

Question

Quizplus · Accepted Answer

The theory of optimum currency areas suggests that the relevant criterion for identifying and designing a common currency zone is the degree of factor mobility, especially capital and labor mobility, within the zone. Other factors such as exchange rates and portfolio management do not feature prominently in this framework.

According to the Theory of Optimum Currency Areas