If everyone in the world spoke the same language, would the world be closer to or further from being an optimal currency area? Explain.

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If everyone in the world spoke the same language, would the world be closer to or further from being an optimal currency area? Explain.

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If everyone in the world spoke the same language, would the world be closer to or further from being an optimal currency area? Explain.

Explanation & AnswerSolution by a verified expert

Explanation
When workers in a region can move easily and are responsive to change in relative demand, then the region is said to be an optimal currency area. Countries in such an area can either fix their currencies or adopt the same currency and thus keep all the benefits of flexible exchange rates without any of the costs.

If everyone in the world spoke the same language, it would promote labor mobility. As the number of efficient immigrants, who are capable of doing any job, increases, the number of jobs will also increase. In this case, countries can either fix their currencies or adopt the same currency to achieve the benefits without sacrificing domestic economic goals.

Verified Answer
The world will be closer if nations will speak the same language as the mobility of labor can be enhanced. The difference in communication can pose a problem in the free mobility of the labor between regions.

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