Using a money-augmented production possibilities frontier and trade triangles approach to teach currency union membership

This paper adds money to a production possibilities frontier (PPF) and trade triangles framework to enable undergraduate students to analyze the merits of currency union membership. The model developed for this purpose considers a country in the European Union, a country in the Euro area, and a state in the United States. The analysis ranks the three economies in terms of monetary efficiency; the ability of the governments to use monetary, exchange rate, and fiscal policies; labor mobility; access to federal/supranational monetary and fiscal policies; and access to federal/supranational income support programs. The visual nature of the PPF model helps students understand abstract concepts like currency conversion costs and policy trade-offs through concrete representations. This approach supports diverse learning styles and facilitates classroom discussions about the economic and non-economic factors that influence currency union decisions. Furthermore, we contrast our teaching model with the more mathematically sophisticated approaches found in Krugman et al. (2023), demonstrating how the PPF/trade triangle/money model makes similar concepts accessible to students with only a principles-level knowledge of economics.