Currency Gaps - Dollar shortage hobbles Egypt's economy

Many teachers cover currency gaps as part of their courses in development economics. Here is a terrific applied example to use. A shortage of dollars in Egypt, used for paying for some goods and services is driving inflation higher.

In many developing economies, people are keen to receive payment in dollars because dollars retain their value.

As a result, for many of these goods, prices are increasing because of the relative shortage of dollars, and this means that some people are unable to trade - notably car dealers - and others are unable to buy goods that previously they could afford.