A disadvantage of dollarization is that it

Question

Quizplus · Accepted Answer

Dollarization means a country uses a foreign currency, specifically the US dollar, as its official currency. By doing so, the country gives up its own monetary policy, meaning it cannot independently influence interest rates, money supply, or exchange rates. This can hinder a country's ability to respond to its own economic conditions and may limit its ability to address macroeconomic problems such as recessions or inflation. As a result, choice C is the best answer as it states that dollarization does not allow a country to pursue its own independent monetary policy. Choices A, B, and D describe advantages of dollarization, not disadvantages.

A Disadvantage of Dollarization Is That It