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Two arrangements when a country does not have its own legal tender:

a. Currency union and currency board
b. Dollarization and currency union
c. Currency board and pegged exchange rate
d. Floating exchange rate and pegged exchange rate

User Hayi
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1 Answer

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Final answer:

A country without its own currency may enter a currency union, establish a currency board, adopt dollarization, or maintain a pegged exchange rate system. A currency union shares a common currency between nations, a currency board pegs the currency's value to another, and dollarization means officially using a foreign currency.

Step-by-step explanation:

When a country does not have its own legal tender, it can adopt several approaches, such as forming a currency union or implementing a currency board. Another option is dollarization, which means a country adopts a foreign currency, such as the U.S. dollar, as its official currency. A currency union involves sharing a common currency with other countries, whereas a currency board is a fixed exchange rate system where a country's currency's value is pegged to another currency or a basket of currencies. A pegged exchange rate is a form of currency board but with a government's commitment to buy and sell its own currency at a fixed rate compared to another currency. On the other hand, a floating exchange rate is where the currency value is determined by market forces without direct government or central bank intervention.

User Sinisa Drpa
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