Why does a high degree of real wage flexibility tend to reduce a country’s cost of joining a currency union?

1. A Option A: 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
2. B Option B: 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
3. C Option C: Real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency
4. D Option D: All of the reasons given in these answers are correct

Answer checked 11 October 2026 · How we write and check questions