According to an article in the Economist, “Zimbabwe abandoned its worthless currency not long after monthly inflation hit 80 billion per cent in November 2008. Zimbabweans now use American dollars.” The article also notes that average incomes in Zimbabwe had fallen by two-thirds, but after the country abandoned its currency for the U.S. dollar, economic growth began to occur.
a. Why would Zimbabwe abandon its own currency to begin using U.S. dollars?
b. Why would using the U.S. dollar as its currency have enabled the economy of Zimbabwe to resume growing?
c. What potential problems could using U.S. dollars rather than its own currency pose for the Zimbabwean government?