ECONOMICS
BARRIERS TO TRADE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Converting to different currencies makes a good cost less.
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Banks are not able to handle different kinds of currencies.
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The dollar is the most valuable currency in the world.
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This makes it possible to buy abd sell goods between nations with different types of money.
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Detailed explanation-1: -Foreign exchange is the trading of different national currencies or units of account. It is important because the exchange rate, the price of one currency in terms of another, helps to determine a nation’s economic health and hence the well-being of all the people residing in it.
Detailed explanation-2: -The foreign exchange markets play a critical role in facilitating cross-border trade, investment, and financial transactions. These markets allow firms making transactions in foreign currencies to convert the currencies or deposits they have into the currencies or deposits they want.
Detailed explanation-3: -Benefits of currency substitution Currency substitution has been effective in keeping inflation lower in countries such as Zimbabwe, Ecuador and El Salvador who have undergone currency substitution. Low inflation, in turn, encourages more bank lending and business investment.