In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S. dollar as its official currency. What will no longer be possible for the government of Ecuador?
A)Financing government deficits by printing money.
B)Financing government deficits by borrowing in the financial markets.
C)Running a balance of payments deficit on the current account.
D)Running a balance of payments deficit on the capital account.

Question

Quizplus · Accepted Answer

By adopting the U.S. dollar, Ecuador gave up its ability to print its own currency, which means it can no longer finance government deficits by creating more money.

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