Dollar Shortage

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.

BREAKING DOWN '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. Dollar Drain

    When a country imports more goods and services from another country ...
  2. Dollar Rate

    The exchange rate of a currency against the U.S. dollar (USD). ...
  3. Net Exporter

    A country or territory whose value of exported goods is higher ...
  4. Net Importer

    A country or territory whose value of imported goods is higher ...
  5. Trade Surplus

    An economic measure of a positive balance of trade, where a country's ...
  6. Terms of Trade - TOT

    The value of a country's exports relative to that of its imports. ...
Related Articles
  1. Markets

    Countries Most Affected By A Strong U.S. Dollar

    The U.S. dollar is still the most important currency in the world. It's used for trade, foreign reserves, and as a substitute for the gold standard. As the U.S. dollar continues to grow stronger, ...
  2. Markets

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  3. Trading

    Play Foreign Currencies Against The U.S. Dollar And Win

    Don't panic when the dollar drops. Learn to exploit the greenback's decline and profit from it.
  4. Markets

    Understanding Terms of Trade

    Terms of trade measures a country’s trading efficiency.
  5. Trading

    The U.S. Dollar's Unofficial Status as World Currency

    Discover how and why the U.S. dollar emerged as official currency in many foreign countries.
  6. Trading

    3 Factors That Drive The U.S. Dollar

    We look at three important factors that affect U.S. dollar value, and how to determine when it's the right time to buy currency.
  7. Markets

    Macroeconomics: International Trade

    By Stephen Simpson International trade is the exchange of goods, services and capital across national borders. It is a multi-trillion dollar activity, central to the GDP of many countries, and ...
  8. Trading

    Profiting From A Weak U.S. Dollar

    Learn how to allocate your investments when the U.S. dollar is down.
  9. Trading

    The Pros & Cons Of A Strong Dollar

    As the U.S. economy has emerged from the Great Recession, the strength of the U.S. dollar has also improved.
  10. Trading

    Dollarization Explained

    Find out how fledgling economies can find some stability in their currency and attract foreign investment.
RELATED FAQS
  1. What economic indicators are most used when forecasting an exchange rate?

    Discover what economic indicators are most widely used to forecast a country’s exchange rate and how various factors influence ... Read Answer >>
  2. What is a trade deficit and what effect will it have on the stock market?

    A trade deficit, which is also referred to as net exports, is an economic condition that occurs when a country is importing ... Read Answer >>
  3. What happens to the US dollar during a trade deficit?

    Learn what happens to the U.S. dollar during trade deficits. Trade deficits happen when imports exceed exports leading foreigners ... Read Answer >>
  4. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
  5. What do the terms weak dollar and strong dollar mean?

    The two terms, weak dollar and strong dollar, are generalizations used in the foreign exchange market to describe the relative ... Read Answer >>
  6. When has the United States run its largest trade deficits?

    Learn in what year the United States ran its largest negative balance of trade as a result of imports greatly exceeding the ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center