Question

"In the United States, currency holdings per person average about" a. $110; one explanation for this relatively small average is that many people use credit and debit cards to make transactions. b. $110; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. c. $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. d. $4,490; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.

Answer 1

The substantial $3,500 currency holdings per person in the U.S. is more than individuals typically carry due to reasons like illegal activities, the underground economy, foreign holdings, and the rise of digital payments.

Step-by-step explanation:

In the United States, currency holdings per person do not typically match the total currency in circulation divided by the population due to various factors. The total amount of U.S. currency in circulation divided by the U.S. population amounts to about $3,500 per person. However, this figure is much more than what individuals usually carry with them. One reason for this discrepancy is that a significant portion of cash is held outside the banking system for various reasons, such as by individuals who do not use banks, in illegal activities where cash is preferred, or in the underground economy. Additionally, much of the currency can be held abroad, driven by U.S. dollars being a global reserve currency. Also, the advent of digital payment methods like credit and debit cards has reduced the need for individuals to carry large amounts of cash.