The theory of an OCA sets out benefits to be derived from increased trade. A comparison of the U.S. currency area with that of the Eurozone reveals that:
A) interstate and inter-region trade is roughly equal in both areas.
B) interstate and inter-region trade in the United States is smaller as a percent of gross state product than the same figure for Europe.
C) interstate and inter-region trade in the United States is much larger as a percent of gross state product than the same figure for Europe.
D) trade comparisons are largely irrelevant to the success of a currency union.
Ans: C) interstate and inter-region trade in the United States is much larger as a percent of gross state product than the same figure for Europe.
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Fiscal policy would be more effective if
A. potential income was unknown. B. the government could change taxes and expenditures rapidly. C. the size of the government debt didn't matter. D. crowding out occurred more often.
If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should:
A. leave its output decision unchanged because it is earning a profit. B. employ more fixed factors of production. C. expand output to earn greater profits or smaller losses. D. reduce output to earn greater profits or smaller losses.