MICROECONOMICS (LL) W/ACCESS
MICROECONOMICS (LL) W/ACCESS
21st Edition
ISBN: 9781260199888
Author: McConnell
Publisher: MCG
Question
Chapter 27, Problem 1DQ
To determine

The need for the transaction of international currency.

Expert Solution & Answer
Check Mark

Explanation of Solution

International transactions take place mainly when there are exchanges of goods and services between the nations. The nation which exports receives currency and the nation which imports pays the currency of others or internationally-accepted currency. This is how the normal exchange of currency takes place. The barter system was present before the introduction of money as the medium of exchange. It was the system in which commodities were traded for other commodities. Now, the barter system cannot be found anywhere between the countries. Even if found, it will be a very rare case.

Even though there are no imports or exports of goods and services in the country, the financial market may be linked to other countries. The asset market as well as the share markets is interlinked and any country can make investments in the asset and share market of the country. Thus, as a result, even though there are no imports or exports, the nation can still engage in international financial transactions.

Economics Concept Introduction

Concept introduction:

Currency: It is the form of money used in society as a medium of exchange.

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