Chapter 18, Problem 12AA

To determine

To explain the need for foreign exchange markets.

Explanation of Solution

Foreign exchange markets are necessary because it is the base of trading between countries as it provides the exchange rate of currencies through which fair trade becomes possible & the actual value of the country’s currency can be known. This helps in the generating of fair prices of the products which also helps in determining the economic health of the nation.

This is a major aspect of trade as it is a dynamic world and the prices and value of currencies fluctuate based on the market forces, so it makes the trade easier by defining the values of currencies so that international trade can be beneficial to the world.