In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S. dollar in order to solve its inflation problem. As long as Ecuador maintains the U.S. dollar as its official currency, what will happen to the monetary policy of Ecuador?
A)It will become both more powerful and more flexible.
B)It will become more powerful but less flexible.
C)It will become less powerful but more flexible.
D)It effectively will cease to exist.

Question

Quizplus · Accepted Answer

By adopting the U.S. dollar, Ecuador relinquished control over its monetary policy to the U.S. Federal Reserve, meaning it cannot adjust interest rates or print currency independently, effectively causing its own monetary policy to cease to exist.

In the Early 2000s, Ecuador Replaced Its Currency, the Sucre