The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions.If the US,Canada,and Mexico had one single currency (the Peso-Dollar)we would tend to see all of the following EXCEPT:
A) Even more intraregional trade of goods across the three countries.
B) Lower transaction costs of trading within North America.
C) A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
D) Less migration of workers across the three countries.
E) An elimination of correlated macroeconomic shocks across the countries.

Question

Quizplus · Accepted Answer

The adoption of a single currency would not necessarily reduce migration of workers across the three countries, as this is largely driven by differences in labor market opportunities, wages, and demographic factors. Therefore, option D would be the least likely outcome among the choices provided. The other options (A, B, C, E) are all plausible outcomes that might result from the formation of a single currency area.

The Optimal Currency Area Involves a Trade-Off of Reducing Transaction