The foreign holdings of U.S. dollars
A) are hard to explain since the dollar is not legal tender outside the United States.
B) have decreased substantially during the last decade.
C) indicate that foreigners have confidence in the monetary policy and economy of the United States.
D) are largely held in countries with a lengthy historical record of monetary and price stability.

Question

Quizplus · Accepted Answer

Foreign holdings of U.S. dollars indicate that foreigners have confidence in the monetary policy and economy of the United States. This is because the U.S. dollar is the world's dominant reserve currency and is considered a safe-haven asset. Therefore, central banks and investors around the world hold U.S. dollars as a store of value and to conduct international transactions.

The Foreign Holdings of U.S. Dollars