Currency substitution means
A)use of money instead of barter.
B)use of countertrade instead of money.
C)use of foreign exchange instead of domestic currency.
D) all of the above.
E) none of the above.

Question

Quizplus · Accepted Answer

Currency substitution refers to the phenomenon where the citizens of a country use foreign currency, usually a more stable currency, such as the US dollar or the euro, instead of their own domestic currency. This happens mainly in countries where there is low confidence in the local currency due to factors such as high inflation, political instability, or economic uncertainty. People prefer to hold foreign currency as a store of value, use it for transactions, and invest in it rather than holding their own currency. This creates a situation where the foreign currency substitutes for the domestic currency in the economy.

Currency Substitution Means