The need for the transaction of international currency.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Assume that the U.S. interest rate is 12 percent, while the British interest rate is 15 percent. If interest rate parity exists, then: O a.U.S. investors will earn 12 percent whether they use covered interest arbitrage or invest in the United States. O b. U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the United States. O c. British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the United States. O d. U.S. investors will earn 15 percent whether they use covered interest arbitrage or invest in the United States.

Suppose that a Big Mac in the US costs $3.15 and 2.99 Bolivianos in Bolivia. The currency exchange rate is $1 US buys 6.54 Bolivianos. According to the law of one price, the exchange rate should be $1 US buys Bolivianos and so, over time, the US dollar should O 0.95; appreciate O 0.95; depreciate 9.49; appreciate 9.49; depreciate

11. Suppose that the nominal exchange rate between the euro and the British pound was €0.80 per £1.0 last year, one unit of German output cost €4.0 last year, and one unit of British output cost £6.0 last year. a. What was last year's real exchange rate between the U.K. and Germany, expressed as the cost of British output (i.e. - the quantity of German output that exchanges for 1 unit of British output)? In which country were goods more expensive last year? b. Suppose that between last year and this year the British pound depreciated by 25% against the euro (a 25% decrease in the number of euros required to buy 1 pound). If the price of goods in the U.K and Germany are unchanged from last year, what is this year's new real exchange rate? In which country are goods more expensive this year? Now suppose, instead, that between last year and this year, the pound depreciated by 25% against the euro and Germany experienced a 40% decrease in its price level (a 40% decrease in the number of…

Answer 2

Question

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

Answer 6

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

Answer 7

Chapter 21, Problem 1DQ

To determine

The need for the transaction of international currency.

Answer 8

Expert Solution & Answer

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.