Higher costs result from a currency union when:

Question

Quizplus · Accepted Answer

When nations are economically dissimilar, a currency union can result in higher costs because demand shocks affect each economy asymmetrically. This can lead to imbalances in trade, employment, and output between the countries, which can lead to higher costs such as higher unemployment, lower growth, and lower investment. In contrast, if nations are economically similar, demand shocks affect each economy symmetrically, which can help to mitigate these imbalances and result in lower costs.

Higher Costs Result from a Currency Union When