Consider three countries that are considering joining a currency union called the CU: Country A, Country B, and Country C. Country A and Country B have similar trade volumes with other countries in the CU, and both are higher than Country C’s trade volumes with the CU. Country B and Country C have the same degree of symmetry in their shocks with the CU, and both are lower than Country A’s symmetry of shocks with the CU.

a. Plot Country A, Country B, and Country C on a symmetry-integration diagram.

b. Suppose that, based on the OCA, Country A and Country B join the CU but Country C does not. Illustrate the OCA line on your diagram based on this information.

c. Suppose that Country A decides to maintain a fixed exchange rate against the CU’s currency. Is it possible that it is optimal to do so, even if it is not optimal to join the CU currency union? Explain why or why not, and illustrate the appropriate FIX line on your diagram.