• The number of independent countries has almost tripled since World War II: in 1946 there were 76 independent countries, and today there are 193.
• Not surprisingly, the expansion of the number of countries led to a proliferation of the number of currencies.
• More recently, however, the proliferation of many small countries, the increasing volume of world commerce in goods and services and in financial exchanges, and the renewed emphasis on price stability are formidable forces leading toward dollarization.

1. Describe the concept of dollarization and explain the reasons for adopting it. (1 point)

2. Discuss the three types of dollarization and provide EXAMPLES of any three countries that have adopted the different forms dollarization (at least one each). (1.5 points)

3. Evaluate the two advantages and two disadvantages of embracing dollarization. (2 points)

4. Analyze whether the European Union is implementing the concept dollarization. (0.5 points)