Economics, 3rd Edition

QUESTIONS FOR REVIEW

1 

What are the main advantages of forming a currency 

union? What are the main disadvantages?

2 

Are the advantages and disadvantages you have listed 

in answer to question 1 long run or short run in nature?

3 

Is a reduction in price discrimination across countries 

likely to be an important benefit of forming a currency 

union? Explain.

4 

What are the main characteristics that reduce the costs 

of a common currency?

5 

How would an asymmetric supply-side shock to a country 

that was a member of a currency union affect the country 

and the other members of the currency union?

6 

What is an optimum currency area (OCA)? List the 

criteria that an OCA must satisfy.