Which of the following is true?
A)The euro has become the official reserve asset of the world.
B)A currency board has many of the benefits of full dollarization and, under a currency board, seigniorage is not lost.
C)In the future, it is expected that the major industrial powers will return to a fixed exchange rate system as they further coordinate monetary policies.
D)Electronic payments are cheaper and therefore increase the amount of seigniorage earned by the government.

Question

Quizplus · Accepted Answer

A currency board, like full dollarization, pegs a country's currency to another currency (e.g. the US dollar), but it also allows for the issuance of domestic currency backed by foreign reserves. This provides some flexibility in monetary policy while still maintaining the stability and credibility of the peg. Additionally, under a currency board, seigniorage (the profit earned from printing money) is not lost because the domestic currency is backed by foreign reserves, making it more valuable and reducing the risk of inflation.

A) The euro is not currently the official reserve asset of the world. While it is a major currency and is widely used in international transactions, the US dollar still holds the dominant position as the world's reserve currency.

C) It is difficult to predict what monetary arrangements the major industrial powers will adopt in the future, but there is currently no consensus or coordination towards a return to a fixed exchange rate system.

D) While electronic payments may be cheaper for consumers and businesses, the cost savings do not necessarily increase the amount of seigniorage earned by the government. Seigniorage is primarily earned from the difference between the actual cost of producing currency and its face value, which does not necessarily change with the mode of payment.

Which of the Following Is True