According to the Theory of Optimum Currency Areas

question 65

Multiple Choice

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 above.

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Definitions:

Credible Threat

A declaration or signal that one will take some negative action if conditions are not met, and it is believable and capable of being executed.

Oligopolistic Situation

A market condition where a few companies have the majority of market share and control over pricing.

Barriers to Entry

Factors that make it difficult for new firms to enter a market, often leading to reduced competition.

Dominant Strategies

Strategies in game theory that are preferable regardless of the opponent's actions, leading to a stable solution.