The benefits to a country from dollarization include each of the following, except:
A. a lower risk premium since inflationary finance is no longer a possibility.
B. no risk of an exchange rate crisis.
C. greater and faster integration into world markets, increasing trade and investment.
D. increased revenue from seignorage.
Answer: D
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Everything else equal, a decrease in the demand for dollars in exchange for the pesos:
A) will cause the dollars to depreciate against the pesos and will increase the quantity of dollars being traded in the foreign exchange market. B) will cause the dollars to depreciate against the pesos and will decrease the quantity of dollars being traded in the foreign exchange market. C) will cause the dollars to appreciate against the pesos and will decrease the quantity of dollars being traded in the foreign exchange market. D) will cause the dollars to appreciate against the pesos and will increase the quantity of dollars being traded in the foreign exchange market.
If there is a recession, the Fed would most likely:
a. encourage banks to provide loans by lowering the discount rate. b. encourage banks to provide loans by raising the discount rate. c. restrict bank lending by lowering the discount rate. d. restrict bank lending by raising the discount rate. e. restrict bank lending by lowering the federal funds rate.
Over time the full-employment level of output in the United States has risen steadily
a. True b. False
Because banks make loans based on expectations concerning future economic activity, they
a. tend to make more loans during recessions and fewer loans during periods of prosperity, which helps the economy b. tend to make more loans during periods of prosperity and fewer loans during recessions, which doesn't help the economy c. make the same level of loans whether there is prosperity or recession but the profit they earn, which is based on the interest rate, varies d. expand the money supply faster in recessions than during periods of prosperity e. keep more excess reserves during periods of prosperity than during recessions