For which of the following countries would dollarization probably have the most potential benefits,based on the four criteria for optimal currency areas?
A) Mexico
B) Poland
C) South Africa
D) Turkey
E) Pakistan

Question

Quizplus · Accepted Answer

Of the five countries listed, Mexico most closely meets the four criteria for optimal currency areas. Mexico has relatively high trade and labor mobility within its borders, reducing the risk of regional economic shocks. The country also has a relatively consistent business cycle, which helps to stabilize the economy. Finally, Mexico has experienced high levels of inflation and currency depreciation in the past, making it potentially more beneficial to adopt the US dollar as a stable currency.

For Which of the Following Countries Would Dollarization Probably Have