Dollar Shortage

AAA

DEFINITION of 'Dollar Shortage'

A dollar shortage occurs when a country lacks a sufficient supply of U.S. dollars for use in international trade. One way to accumulate dollars is for a country to export more goods (paid for in dollars) than it imports. However, many countries are net importers, and therefore do not naturally accumulate enough dollars through their balance of payments. If the dollar shortage is critical, sometimes a country may request assistance from the U.S. for temporary liquidity.

INVESTOPEDIA EXPLAINS 'Dollar Shortage'

The U.S. dollar is one of the most important currencies used in international trade. Since the U.S. is the largest economy in the world (as of 2009), trade with the U.S. is an important facet of many countries' economies. In addition, the dollar is favored as a currency in international trade because of its stability as a store of value. One of the most important examples is crude oil, which is priced and sold in U.S. dollars worldwide.

RELATED TERMS
  1. Trade War

    A negative side effect of protectionism that occurs when Country ...
  2. Liquidity Crisis

    A negative financial situation characterized by a lack of cash ...
  3. Trade Finance

    The financing of international trade. Trade finance includes ...
  4. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  5. Transaction Exposure

    The risk, faced by companies involved in international trade, ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Economics

    Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.
  2. Options & Futures

    Exploring Non-Dollar Currencies For Forex Trading

    Learn how investments in foreign currencies can diversify your portfolio.
  3. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  4. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  5. Forex Education

    Commodity Prices And Currency Movements

    Find out which currencies are most affected by fluctuations in gold and oil prices, and improve your trading.
  6. Forex Education

    Global Trade And The Currency Market

    Learn how the Bretton Woods system got the ball rolling for world trade.
  7. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  8. Forex Education

    The International Money Market

    Banks, corporations, traders and speculators all use the IMM to borrow, lend, trade, profit, finance, speculate and hedge risks.
  9. Investing

    Bill of Exchange

    A bill of exchange is a document used in international trade to pay for goods or services. It is signed by the person promising to pay, and given to the person entitled to receive the money. ...
  10. Economics

    Can state and local governments in the US run fiscal deficits?

    Discover why most state and local governments do not – or cannot – run fiscal deficits in the same manner as the U.S. federal government.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center