Question

Identify whether each attribute in the following table is an advantage or disadvantage of sharing a currency across country boundaries.

Attribute	Advantage	Disadvantage
Enhanced competition
Increased difficulty adjusting out of recession
Higher risk of public debt
Uniform prices
Lower cost of currency conversion

Which of the following are reasons the European Union is considered suboptimal OR optimal currency area? Check all that apply.

-A single monetary policy that is equally effective across borders

-No legal or cultural barriers to labor mobility across borders

-limited use of fiscal policy

-Labor mobility

Answer 1

Enhanced competition Advantage
Increased difficulty adjusting out of recession Disadvantage
Higher risk of public debt Disadvantage
Uniform prices Advantage
Lower cost of currency conversion Advantage

Following are the reasons why European Union is considered optimal or suboptimal currency area:-

( i ) A single monetary policy that is equally effective across borders.

( ii ) No legal or cultural barriers to labor mobility across borders.