A country loses the ability to conduct discretionary control of the money supply when it
A) uses a floating exchange rate.
B) engages in dollarization.
C) uses fiat money.
D) all of the above.

Question

A country loses the ability to conduct discretionary control of the money supply when it 
A)  uses a floating exchange rate.
B)  engages in dollarization.
C)  uses fiat money.
D)  all of the above.

Quizplus · Accepted Answer

Engaging in dollarization means that a country adopts the use of a foreign currency, typically the US dollar, as its own currency. In doing so, the country gives up its ability to conduct discretionary control of the money supply since it no longer has its own central bank to manage its monetary policy. Using a floating exchange rate or fiat money does not necessarily result in the loss of control over the money supply.

A Country Loses the Ability to Conduct Discretionary Control of the Money