ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Because you want to eliminate economic trade barriers
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Because another country’s currency is always worth more than ours
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Because the values of different currencies are not the same
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Because the other country’s government wants to collect taxes in their own currency
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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: -The exchange rate is important for several reasons: a. It serves as the basic link between the local and the overseas market for various goods, services and financial assets. Using the exchange rate, we are able to compare prices of goods, services, and assets quoted in different currencies.
Detailed explanation-3: -Why are Currencies Different Around the World? Different currencies exist because different countries have various economic landscapes. In most cases, a county which exports a lot of goods will aim to have a low-value currency to keep on top of their trade advantage and attract people to buy their products.
Detailed explanation-4: -The purpose of a fixed exchange rate system is to keep a currency’s value within a narrow band. Fixed exchange rates provide greater certainty for exporters and importers and help the government maintain low inflation.