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:

Collusion

A secret agreement or cooperation between two or more parties for a fraudulent, illegal, or deceitful purpose, often in business or trade practices.

Internal Control System

An internal control system encompasses the rules, procedures, and measures implemented by an organization to safeguard assets, enhance the reliability of financial reports, and ensure compliance with laws and regulations.

Systems Design

The process of defining the architecture, components, modules, interfaces, and data for a system to satisfy specified requirements.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible into known amounts of cash with original maturities of three months or less.