She has been visiting the same tropical island for 16 years for vacations. When

Question

She has been visiting the same tropical island for 16 years for vacations. When she goes she pays for everything by writing checks drawn on her U.S. bank. The currency the natives use are not U.S. dollars; they use a currency called a pon. The natives never cash her checks. She is so well known on the island that the natives simply trade her checks among themselves. The question you need to answer is: who is paying for her vacation? (You can assume her bank would honor the checks if presented for payment even after a considerable period of time has passed, and thus take the money of our her account.) A. The natives are paying for the vacation since the checks become new money, thus decreasing the value of money in the economy (causing inflation), reducing the purchasing power of all natives holding pon or the checks. B. The island

Explanation / Answer

. D. The famous American is paying for the vacation since she wrote the checks which can be cashed at any time

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