The use of foreign money instead of domestic money when the domestic economy has a high rate of inflation is called _____.

Question

Quizplus · Accepted Answer

Currency substitution is the use of foreign currency instead of domestic currency in a high inflation economy. This occurs when people lose confidence in their domestic currency and instead turn to using a more stable foreign currency for transactions. This can lead to a decrease in demand for domestic currency and a negative impact on the domestic economy.

The Use of Foreign Money Instead of Domestic Money When