Select the correct benefits and drawbacks to a Dollarized exchange rate:
a. Could produce a private goods economy but encourages a currency black market.
b. Could be used to replace domestic currency if the currency is weak, financial institutions are suspicious, and the dollar is strong.
c. Could be based on attachment to precious metals (gold) but could lead to inflation if a country prints too much money.
d. Supply and demand are market driven but governments can manipulate value by either printing money or removing currency from circulation.
Ans: b
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What will be an ideal response?
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Indicate whether this statement is true or false.