According to the Theory of Optimum Currency Areas,a Currency Area

question 213

Multiple Choice

According to the theory of optimum currency areas,a currency area has the least chance for success when:

• A) Countries of the currency area have differing business cycles
• B) Workers have a high degree of mobility across borders of the currency area
• C) Prices and wages can be adjusted in response to economic disturbances
• D) A single monetary policy affects all member countries in the same manner

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Definitions:

Ingroup Bias

The inclination to prefer individuals from one's own group above those from outsider groups, frequently resulting in bias and unfair treatment.

Free Riders

Individuals or entities that benefit from resources, goods, or services without paying for them or contributing to their provision.

Common Resource

A type of good that is accessible to all members of a community or society but is susceptible to overuse and depletion.

Disjunctive Tasks

Tasks in which the performance of the group is determined by the performance of the best individual member.