Which of the following is an example of a country that uses another nation's currency as its official currency?

• A. India using the Indian rupee
• B. Brazil using the Brazilian real
• C. Ecuador using the US dollar
• D. Japan using the Japanese yen

Answer: (C)

Verified step by step guidance

1. Understand the concept of 'currency substitution' or 'dollarization,' where a country adopts another nation's currency as its official medium of exchange instead of issuing its own currency.
2. Review the examples given: India using the Indian rupee, Brazil using the Brazilian real, Japan using the Japanese yen—all of which use their own national currencies.
3. Identify the example where a country uses a foreign currency officially. Ecuador is known for using the US dollar as its official currency, a process called dollarization.
4. Recognize that this means Ecuador does not issue its own currency but relies on the US dollar for all transactions, monetary policy, and pricing.
5. Conclude that among the options, 'Ecuador using the US dollar' is the correct example of a country using another nation's currency officially.