The exorbitant privilege for the United States implies that:
A) the United States can lend money to people at low interest rates.
B) U.S. investments abroad often earn very low interest rates.
C) foreigners' investments in the United States earn them less income than the U.S. investments abroad.
D) foreigners' investments in the United States earn them more income than the U.S. investments abroad.

Question

Quizplus · Accepted Answer

The exorbitant privilege for the United States refers to the fact that foreigners' investments in the United States earn them less income compared to the income that U.S. investments abroad earn. This is because the U.S. dollar is the dominant reserve currency in the world, and is used for international transactions and held by central banks as reserves. As a result, the United States can borrow money from other countries at lower interest rates, while foreigners investing in the United States receive lower returns.

The Exorbitant Privilege for the United States Implies That