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

question 16

Multiple Choice

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.

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Definitions:

Systematic Observation

A methodical approach to data collection, where researchers observe subjects in their natural environment without intervening or altering conditions.

Casual Observation

An informal method of gathering information based on spontaneous, non-systematic observations.

Direct Observation

A qualitative research method involving the systematic watching and recording of behaviors, events, or phenomena in their natural settings.

Traditional Thinking

Traditional thinking refers to ideas and beliefs that are handed down from generation to generation, often resistant to change and rooted in historical and cultural precedents.