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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

A country whose currency is the primary reserve currency can likely borrow at lower interest rates than it could if its currency were not the primary reserve currency. Do you agree or disagree? Explain.

To determine

Check the statement whether a country with primary reserve currency can borrow at a lower interest rate than other countries.

Explanation

The primary reserve currency is a certain quantity of foreign exchange in terms of currency, particularly dollar, which is held by the central bank and other financial institutions. During August 2011, China held around 62.5 percentage of their foreign exchange reserve in dollars, mostly in the form of government bonds. It is because dollar is the primary reserve currency...

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