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Economics
MEDIUM
ENGLISH
Economics
A high degree of real wage flexibility will tend to reduce the cost to a country of joining a currency union because ?
A
All of the reasons given in these answers are correct
Option A
real wages fall rapidly in a recession and the economy moves quickly back to long run equilibrium so limiting the duration of the recession even when exchange rate adjustment is not possible
Correct answer
C
workers will move from a country in which aggregate demand falls to other countries of the currency union, and so unemployment remains lower than it otherwise would
Option C
D
real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency
Option D
Correct answer: B
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