What is an optimal currency area?

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What is an optimal currency area?

What is an optimal currency area?

Answer & Explanation (1)

Explanation
When workers in a region can move easily and are responsive to change in relative demand, 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 save all the profits of flexible exchange rates without any of the costs.

Verified Answer
When a region can have a fixed or floating exchange rate and can also have the benefits of the flexible exchange rate, whereas the labors can move easily within a region. This term is known as optimal currency area.

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