In some developing countries and in some former Communist countries, people exchange their domestic currencies for foreign currencies such as the dollar in black markets. Why would this practice go on?

What will be an ideal response?


The country must have some restrictions on currency exchange. Some countries have made it illegal to exchange the domestic currency for dollars beyond some minimum amount while others set official exchange rates. If the official exchange rate differs from the “market” exchange rate, it is likely black markets will form.