When a Domestic Currency Is Completely Backed by a Foreign

question 9

Multiple Choice

When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency,then the country is said to have

• A)created a currency board.
• B)undergone dollarization.
• C)adopted a managed exchange system.
• D)adopted an exchange rate monetary system.

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Definitions:

Opportunity Cost

The expense incurred by not choosing the second-best option while making a decision.

Labor Decreases

A situation where the workforce or the amount of work done decreases due to factors like automation, layoffs, or economic downturns.

Retain Earnings

Profits that a company keeps after dividends have been paid out to shareholders, often used for reinvestment in the business.

Dividends

Distributions of earnings given by a company to its stockholders, typically from the profits made.