I would rate if your answer is helpful, the answer is in red as an aid for you to explain, please try!

Q20. The US dollar is the world's foremost international reserve currency - it is held by central banks, international nancial institutions, households and drug lords all over the world both as a store of value and as a medium of exchange in situations where the local currency is less useful because of low liquidity. capital controls or high ination. What is the effect of resolve currency status on the velocity of the dollar? On US seignorage revenue? The large stock of dollars held abroad will distort measures of velocity downwards, since velocity measures compare the value of all dollars in circulation to USbased transactions [deals between Latin American drug lords are not measured or recorded]. As noted by James Hamilton, the growth of dollars held abroad [there is about $500 billion in US currency held outside the United States as of 2010) "represents one important benefit that the U.S. has received from having a currency that is regarded as a safe and stable store of value. In effect, the growth in foreign-held dollars has meant that the U.S. government has been able to buy hundreds of billions of dollars worth of goods and services without ever needing to tax its own citizens or borrow in the form of interest-bearing Treasury securities. Which is a great deal, as long as those foreign holders don't change their minds and try to dump that currency back on us.\" McKinsey has separately estimated that the seignorage benets of the dollar's reserve currency status is worth about $10 billion per year.\