An Objective of the Dollarization of the Mexican Economy Would

question 28

Multiple Choice

An objective of the dollarization of the Mexican economy would be to:

• A) Shield its economy from hyperinflation,currency depreciation,and capital flight
• B) Allow the Federal Reserve to be its lender of last resort
• C) Ensure that its monetary policy is independent of the Federal Reserve
• D) Permit it to benefit from tariffs and subsidies imposed by the U.S.government

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Definitions:

Foreign Currency Transactions

Deals or business activities that involve the exchange of currencies from different countries, impacting financial statements due to exchange rate changes.

Fair-Value Hedge

A hedge of the exposure to changes in fair value of an asset or liability or an unrecognized firm commitment, which could affect profit or loss.

Forward Contract

a financial agreement between two parties to buy or sell an asset at a future date for a price agreed upon today, commonly used for hedging and speculation.

Gross Method

The gross method is an accounting practice whereby discounts are not considered in the recording of purchases; discounts taken are recorded as income.