Gold Standard or Floating Exchange Rate

country is not an indebted country, say like the US. So, the currency has tended to

Exchange rates play a pivotal role in the relationships between individual economies and the global economy. Almost all financial flows are processed through the exchange rate, as a result the movements and fluctuations of the exchange have a significant impact on international competitiveness, trade flows, investment decisions and many other factors within the economy. Due to the increasing globalisation of the world economy, trade and financial flows are becoming more accessible

Dating back to the XVI century, the theory of purchasing power parity are developed and studied since then in Spain. However, this theory of PPP attracts the scholars till the XX century due to the contribution of a Swedish scholar Gustav Cassel in 1910s (Taylor, 2006). Cassel presented PPP theory using an equivalent term “theoretical rate of exchange” three years ago before he first defined the term PPP and place it into a systematic framework. Additionally, Cassel is also the first person who tested PPP empirically. The cumulative CPI inflation rates of different countries are suggested to be calculated and used to obtain the most effective exchange rate by Cassel to maintain the parity of purchasing

The United States no longer uses the gold standard to back its currency; the dollar is backed solely by trust in it and in the union it represents. There is too much money to back it all by gold. The dollar is per say not worth the paper its printed on in gold.

Exchange Rate: "The rate at which one unit of domestic currency is exchanged for a given amount of foreign currency"

Such a process can be very time consuming and imprecise, without, of course, having a market currency price to begin with. The exchange-rate system is an important topic in international economic policy. Policymakers and journalists often seem to treat the choice of exchange-rate system as one of the most important economic policy choices that a national government makes, on a par with free international trade. Under most circumstances and for most countries, a system of freely floating exchange rates is likely to be a better choice than attempting to peg the exchange rate.

This sounds a little like guesswork and gambling, but there is more to it than what appears on the surface. The exchange rates are set by government agencies in each country. In the United States, most of us have become accustomed to waiting for word from Alan Greenspan about changes in

Currency is unreliable. In some countries the United States dollar is worth more than that countries currency, while in other countries the U.S. dollar is worth less. The exchange rate fluctuates on a continuous base which makes the term “funny money” more realistic each day. The purpose of this paper is to discuss hard and soft currency, the South African rand, Cuban pesos, and why the exchange rates fluctuate.

Foreign exchange rate determines the price exchange of two currencies. Changes in these rates affects the amount of goods and services import and export of a country. When a country currency is stronger, it is now exchanged for more goods than before, and once the currency is weaker, less of goods are purchased for the same amount of the currency. Financial institutions use the exchange rates changes to decide whether to buy/sell financial assets such as bonds, stocks, etc. That means, they will buy and sell foreign assets to gain profit. The value of these assets increases or decreases as the exchange rates change. If the dollar

If a country's economy is in a slow growth or recessionary phase, the value of their currency depreciates. The value of a country's currency also depreciates if its major economic indicators like retail sales and Gross Domestic Product, or GDP, are declining. A high and/or rising unemployment rate can also depreciate currency value because it indicates an economic slowdown. If a country's economy is in a strong growth period, the value of their currency appreciates.

While some researchers have concluded that the one-fixed-one-floating rate system, helps countries protect their international reserves ( See Lai & Chu, 1896, p. 507) and helps maintain inflation low; others, who have conducted country-specific analyses, extensively expose the drawbacks and economic distortions arising from this mechanism (See Hori & Chin Wong , 2008) .

The possibility of the value that is fluctuated by the gold must be only by little percentage whether it is up or down. So, it is not attainable to devalue the gold by higher percentage. From this level, the gold dinar currency can be known as a good currency in international trade between the nations. If we have been using gold as our currencies against the traded products in the market, then there will be no such a problem regarding to the exchange rate. The using of the gold dinar is not intended to be used as a currency for our daily transaction but we can be used this for the national currencies. I found that this system have a good combination of few factors that will boost from any economic turbulence thus gives a lot of opportunity towards business sector in the international trade. By having the gold dinar system, the trades of bilateral and multilateral among the other countries can be straightening out thereby to eradicate the foreign exchange risk. For this mode, gold is to be utilized as a unit of account and a medium of trade rather than the national monetary

The limitations to Governments were that they could not spend what they wanted because the amount of currency in circulation had to correspond to the amount of gold in reserve. President Nixon eliminated the gold standard in 1971. It was eliminated because the governments could not manipulate the money supply if it was tied to gold. Once it was eliminated, governments could create as much "Fiat" money as they wanted in order to conduct wars or any other big expenses. Fiat money is money that the government has declared to be legal tender even though it has no actual value and is not backed by reserves. As a result, the currency in circulation today does not have to be backed up by anything. This is why we see trillion dollar deficits today. Politicians can spend what they want regardless of the real economic downfalls that eventually have to be dealt with. Nowadays, on a side note, foreign governments such as the Chinese and others finance our US debt. This means most of debt the US government owns is owed to foreign investors. The answer to whether having gold standard is good or not is based on whom you ask. Economists will have one

The use of money has become most prevalent in terms of purchasing goods and services instead of the old way of bartering. Most nations have different types and rates of money, so countries have to figure out the proper exchange rate that reflects a consistent balance when dealing with the rest of the world. An important observation made by Weaver is that there needs to be a balance of trade. More specifically, there needs to be a balance between a nation’s exports

i) The exchange rate is the rate at which one can exchange the currency of one country for the currency of another country. It can also be regarded as the value of one country’s currency in relation to another currency. Basically, it is the price of a nation’s currency in terms of another currency. Therefore, the exchange rate has two components, the domestic currency and foreign currency, and it can be quoted directly or directly. In a direct quotation, the foreign currency is the base currency and the domestic currency is the counter currency. While in an indirect quotation, the domestic currency is the base currency and the domestic currency is the counter