Dollarization is a policy action that
A) tries to stabilize the value of the local currency vs. the U.S. dollar.
B) adopts the currency of another country as the national medium of exchange.
C) mimics policy actions taken by the U.S. Federal Reserve.
D) outlaws the holding of foreign currencies other than the U.S. dollar.

Question

Quizplus · Accepted Answer

Dollarization involves adopting the currency of another country (in most cases, the U.S. dollar) as the national medium of exchange. It is a policy action taken by a country to replace its own currency with a foreign currency, usually due to issues with domestic currency stability or hyperinflation.

Dollarization Is a Policy Action That