On January 1, 2001, El Salvador "dollarized" its economy. The U.S. dollar circulated throughout the country along with the Salvadoran colon for the first year. By the end of 2002, the official currency circulating in the economy was the U.S. dollar. El Salvador abandoned its own currency and adopted the currency of the United States because:

Question

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El Salvador adopted the U.S. dollar to eliminate the possibility of financing government deficits by printing its own currency, which helps in controlling inflation. By using the U.S. dollar, El Salvador's monetary policy is effectively determined by the Federal Reserve, limiting its own ability to print money and finance deficits, thereby aiming for a more stable economic environment.

On January 1, 2001, El Salvador "Dollarized" Its Economy