If Two Countries Allow People to Move Freely Between Them to Find

question 32

Multiple Choice

If two countries allow people to move freely between them to find work and housing and also have integrated capital markets in terms of rules, regulations, and structures, what are the other two components they need in order to be an optimal currency area (according to Mundell) ?

• A)They need a common central bank and a common language.
• B)They need a common central bank and wage and price flexibility to adjust to shocks that hit.
• C)They need a shared economic history and wage and price flexibility to adjust to shocks that hit.
• D)They need wage and price flexibility and coordinated fiscal policies so one economy does not run a significantly larger deficit than the other.

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Definitions:

Rationality

The quality or state of being reasonable, based on facts or reason rather than emotions or feelings.

Normative Decision Model

A leadership model suggesting the best course of action is dependent on certain norms, situations, or circumstances.

Participative Leadership

A leadership style where leaders involve team members in the decision-making process, enhancing engagement and commitment.

Satisfaction

The feeling of contentment or pleasure derived from meeting one's desires, expectations, or needs.