Is the European Monetary Union a form of dollarization? Explain.
What will be an ideal response?
No it isn't. Using an example form the chapter, Ecuador adopted dollarization, in effect, giving up their currency and using dollars for all transactions. Ecuador is not represented on the FOMC and the FOMC does not consider what is best for Ecuador in making their policy decisions. In addition, Ecuador and other countries that have adopted dollarization do not share in the revenue from seignorage. With the European monetary union while each country uses the same currency, the euro, each country's interest is represented in policy meetings and each country shares in the revenue from seignorage.
You might also like to view...
Which of the following is a common mistake managers make?
A. Treating implicit opportunity costs as part of the total costs of using resources. B. Maximizing the value of the firm instead of maximizing the firm's profits. C. Using marginal analysis to make output decisions. D. Reducing price to increase the firm's share of total market sales. E. all of the above.
The utility of a good or service
A. is synonymous with usefulness. B. rarely varies from person to person. C. is the satisfaction or happiness one receives from consuming it. D. is easy to quantify.