ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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People make more money by trading currency.
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Most people want to use American dollars to trade.
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Banks do not like to exchange their money for other currencies.
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It costs more to do business because banks charge fees for exchanges.
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Detailed explanation-1: -One of the risks associated with foreign trade is the uncertainty of future exchange rates. The relative values of the two currencies could change between the time the deal is concluded and the time payment is received.
Detailed explanation-2: -The currency exchange that banks apply is different from what we see from the rates on the Internet is because of the commission charged by the bank on the money. Hence it becomes higher than the price we see on the Internet.
Detailed explanation-3: -Banks and airport exchange services typically charge a commission on currency exchange and may also charge a service fee.
Detailed explanation-4: -1. In the goods market, a positive shock to the exchange rate of the domestic currency (an unexpected appreciation) will make exports more expensive and imports less expensive. As a result, the competition from foreign markets will decrease the demand for domestic products, decreasing domestic output and price.