Chapter 15, Problem 2P

To determine

Concept introduction:

Answer:

The US dollar was used in Israel as Unit of Account and Store of Value during late 1970s.

Explanation:

During the late 1970s, prices quoted in terms of the Israeli currency rose so fast, that the groceries started listing prices in Dollars instead of Shekel and provided the customers with the dollar-shekel conversion tables that they updated daily. Though the purchases were made by Israelis in shekels, many of them converted shekels to dollars to avoid loss of real value of the shekels held due to inflation. Since all prices were quoted in dollars the US dollars function as the unit of account in account during this period. Though it was not used as the medium of exchange as all transactions were made in shekels, it was used as the store of value as local currency was converted into US dollars to retrieve it for future use and prevent the value of their wealth in reducing in real terms.