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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

How important is labor mobility in determining whether an area is an optimal currency area?

To determine

Importance of labor mobility in determining optimal currency area.

Explanation

The optimal currency area refers to a region that brings full employment and balance of payment equilibrium due to mobility of factors and achieving of economic goals by fixed exchange rates or using a common currency.

As labor is mobile between countries, they can get the benefits of flexible exchange rate through fixed exchange rate or using a common currency. As demand changes, the factor (labor) moves from one to another country and have no separate currency to float with these countries...

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