Eurooptimists are convinced that with OCA criteria as guiding principles: A) Eur

Question

Eurooptimists are convinced that with OCA criteria as guiding principles:

A) Eurozone members will never again be caught in the trap of fiscal irresponsibility.

B) the euro will strengthen against other world currencies to the extent that even occasional debt issues will not affect it.

C) greater market integration will bring about labor and capital mobility and increased trade that will serve to strengthen the Eurozone.

D) the ECB will be able to loosen its stranglehold and provide sufficient liquidity for the Eurozone economies to thrive.

Although Europe is not an OCA, some areas in the European Union would probably meet the criteria. Which of the following would meet them?

A) France, Sweden, and Denmark

B) the former Eastern bloc nations of Yugoslavia, Romania, and Bulgaria

C) the Netherlands, Denmark, and Britain

D) Italy, Germany, Austria, Belgium, the Netherlands, and Luxembourg

Explanation / Answer

OCA must have higher degree of factor mobility, whether it be, capital mobility, labour mobility etc. within an area having single currency. Also, OCA must have both internal and external factor mobility. Also, OCAs must not be divided into boundaries of nations but rather into monetary regions.

OCA are groups of regions with economies closely
linked by trade in goods and services and by
factor mobility. There has to be INTRA - REGIONAL trade.

C) greater market integration will bring about labor and capital mobility and increased trade that will serve to strengthen the Eurozone.

D) italy, germany, austria, belgium, the netherlands, and luxembourg.

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