In the context of foreign exchange rates, which of the following scenarios exemplifies dollarization?
A) The country of Zansas pegs its currency, the Zan, to the U.S. dollar at 5.75 Zan per dollar.
B) Melton, a country facing serious crisis, uses the currency of Alarodo as legal tender for conducting transactions.
C) Pereraus, a developing country, mandates the use of electronic currencies that can be monitored by distributed peer networks for all trading purposes.
D) The country of Denbarrow bases its currency on the gold standard such that the value of the currency can be determined by the ability to trade it for a specified amount of gold.

Question

Quizplus · Accepted Answer

Dollarization refers to the practice of a country using a foreign currency alongside or instead of its own national currency. In the given options, B) Melton using the currency of Alarodo as legal tender is an example of dollarization, even though the specific foreign currency is not named as the U.S. dollar, the concept applies to any foreign currency being used in this manner.

In the Context of Foreign Exchange Rates, Which of the Following