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Essay / Research Paper Abstract
A 3 page paper answering 6 questions regarding Ecuador’s dollarization. The value of the Ecuadorian sucre collapsed after a series of natural, political, economic and banking disasters. Much of the economic activity that means the most to Ecuador is international trade. If they conduct their transactions in dollars, then there is less effect of price differentiation stemming from currency exchange. Also, irresponsible government leaders will not be able to order the printing of more money and so avoid the opportunity for inflation to return to 60 percent. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSfinInDolEcua.rtf
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Unformatted sample text from the term paper:
as its currency? The value of the Ecuadorian sucre collapsed after a series of natural, political, economic and banking disasters. Much
of the economic activity that means the most to Ecuador is international trade. Virtually no country needs or wants to build foreign reserve in Ecuadorian sucres, so that currency
has to be traded for others when either importing or exporting. Producers gain far less for their goods; consumers pay far more for imported goods. If they conduct
their transactions in dollars, then there is less effect of price differentiation stemming from currency exchange. 2. What is dollarization and how does Ecuador plan to implement its dollarization
plan? Dollarization is the process and result of replacing the sucre with the dollar as the nations official currency. Dollarization does not
outlaw continued use of the sucre, but it does make the US dollar the "preferred currency for holding savings, making payments, and pricing goods" (Ecuador Bets Future on the Dollar,
2000). Ecuador held dollar foreign reserves in US banks. After legislation makes the currency plan official and operational, "Ecuadors Central Bank will
go to the U.S. banks where it holds its foreign reserves and ask to cash in its deposits" (Ecuador Bets Future on the Dollar, 2000). These banks will then
request the needed bills from the Federal Reserve and physically transport them to Ecuador. Ecuadorean banks then exchange their sucres for dollars from Ecuadors central bank. 3. What
happened when Ecuadors Central Bank decided to print more sucres in order to solve its economic problems? Adding more sucres to the available
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