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Q. Explain why the dollar of the United States became the postwar world's key currency.
Answer:
1. The untimely convertibility of the U.S dollar in 1945.
2. The special position of the dollar in the Bretton Woods system.
3. The potency of the American economy relative to the devastated economies of Europe and Japan.
4. Central banks logically found it advantageous to hold their international reserves in the form of interest-bearing dollar assets.
How is the foreign exchange rate determined?
Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter
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