A high degree of real wage flexibility will tend to reduce the cost to a country of joining a currency union because ?

Question

Xaibi Aslam · Accepted Answer

real wages fall rapidly in a recession and the economy moves quickly back to long run equilibrium so limiting the duration of the recession even when exchange rate adjustment is not possible

Xaibi Aslam · Answer

All of the reasons given in these answers are correct

Xaibi Aslam · Answer

workers will move from a country in which aggregate demand falls to other countries of the currency union, and so unemployment remains lower than it otherwise would

Xaibi Aslam · Answer

real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency

Question #48537