How does the eurozone compare with USA as a possible optimal currency area (OCA) ?
Correct answer: B. The eurozone has a lower degree of labour mobility than the USA and labour law is much more restrictive in the erozone than in the USA On these measures the eurozone is less likely to be an OCA than is the USA
- A. The eurozone has a higher degree of labour mobility than the USA and labour law is much less restrictive in the erozone than in the USA On these measures the eurozone is more likely to be an OCA than is the USA
- B. The eurozone has a lower degree of labour mobility than the USA and labour law is much more restrictive in the erozone than in the USA On these measures the eurozone is less likely to be an OCA than is the USA
- C. The eurozone has a higher degree of labour mobility than the USA but labour law is much more restrictive in the erozone than in the USA On these measures it is hard to judge whether the eurozone is more or less likely to be an OCA than is the USA
- D. The eurozone has a lower degree of labour mobility than the USA and labour law is much less restrictive in the erozone than in the USA On these measures it is hard to judge whether the eurozone is more or less likely to be an OCA than is the USA
Explanation
Compared with the USA, the eurozone has lower labour mobility and more restrictive labour-market rules, making it less able to adjust to country-specific shocks. On these measures, the eurozone is less likely to qualify as an optimal currency area.
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