1112EconomicsMedium
If two countries A and B are member of a currency union and there is a shift in consumer preferences away from the goods of country A and towards those of country B than which one of the following would help to offset the effect of the resulting changes in aggregate demand in A and B on inflation and unemployment in the tow countries?
AAn increase in government spending in country (A)
BA depreciation in the foreign exchange value of the common currency
CA low degree of capital mobility between the two countries
DA high degree of labour mobility between the tow countries
Correct answer
D. A high degree of labour mobility between the tow countries
Explanation
The correct answer is A high degree of labour mobility between the tow countries.