CFA Practice Question

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CFA Practice Question

By adopting another country's currency as legal tender, a dollarized country inherits that country's ______.

A. currency credibility
B. domestic monetary policy
C. credit-worthiness
Correct Answer: A

Due to lowered transaction costs and greater acceptability of the dollarized currency, dollarized countries can invoke greater confidence among international investors.

User Contributed Comments 5

User Comment
SalimBouch why not B also?
merc5559 same question ^
michaeloa3 I think the country will adopt another country's international monetary policy, not domestic one.
CJHughes They are inheriting the effects of the other countries monetary policy, not the actual policy
MathLoser A dollarized country cannot have its own monetary policy.
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