ECONOMICS (CBSE/UGC NET)

ECONOMICS

TRADE EXCHANGE AND INTERDEPENDENCE

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Why does international trade require a system for exchanging currencies?
A
Because countries will go to war if they do not exchange their currency
B
Because different countries have different forms of money
C
Because OPEC says countries must use international exchange as a law
D
Because the United Nations will not trade with anyone if they have money that is not exchanged
Explanation: 

Detailed explanation-1: -Every time a tourist visits a country, for example, they must pay for goods and services using the currency of the host country. Therefore, a tourist must exchange the currency of their home country for the local currency. Currency exchange of this kind is one of the demand factors for a particular currency.

Detailed explanation-2: -Because every country does not use the same type of money, international trade requires a system for exchanging currencies between nations. Money from one country must be converted into the currency of another country to pay for goods in that country.

Detailed explanation-3: -The international monetary system provides the institutional framework for determining the rules and procedures for international payments, determination of exchange rates, and movement of capital.

Detailed explanation-4: -The five main reasons international trade takes place are differences in technology, differences in resource endowments, differences in demand, the presence of economies of scale, and the presence of government policies. Each model of trade generally includes just one motivation for trade.

Detailed explanation-5: -Restore the balance of payments equilibrium. The main objective of introducing exchange control regulations is to correct the balance of payments equilibrium. Protect the value of the national currency. Prevent capital flight. Protect local industry. Build foreign exchange reserves. 11-Dec-2022

There is 1 question to complete.