In the context of foreign exchange rates, which of the following statements best describes the process of dollarization?
A) It is the process of a country abandoning its currency and using another currency instead.
B) It is the process of a country fixing its currency to a foreign currency that is usually stronger or more stable.
C) It is the process of eliminating currencies that are backed by a physical commodity.
D) It is the process wherein a dollar has intrinsic value such that it can be traded for a specified amount of gold.

Question

Quizplus · Accepted Answer

Dollarization occurs when a country decides to stop using its own currency and adopts a foreign currency as its legal tender, often the U.S. dollar, due to the foreign currency's perceived stability and reliability compared to the domestic one.

In the Context of Foreign Exchange Rates, Which of the Following