Chapter 10: The International Monetary System
(F) Day of the week: Wednesday Class: IS302 Created Time: January 27, 2021 2:26 PM Database: Class Notes Database Date: January 27, 2021 2:26 PM Days Till Date: Passed Last Edited Time: June 9, 2021 10:42 AM
International Monetary System have functions to provide exchange between different currencies of different countries.
The exchange rate makes it complex
- Look at all international transactions to figure out value
- Imports purchase must equal export sells for the country’s currency to stay stable
It makes you richer or poorer depending on if the dollar goes up or down.
The Economics of the international monetary system
Exchange Rate System
The price of one currency valued against another currency
The value changes according to the supply and demand of the currency in the foreign exchange market
Exchange rate system: is a set of rules governing how much the currency can appreciate or depreciate
fixed-but-adjustable exchange-rate system
is a system where the government give their own currency a fixed exchange rate
Managed Float: is when the market determine the exchange rate but the government still try to keep the rate at a reasonable level
EU: fixed exchange rate
Developing Countries: fixed-but adjustable exchange rates
The different systems aren’t better or worse, but both have trade offs
exchange-rate stability on the one hand, and domestic economic autonomy on the other.