Convertible national currencies, Managerial Economics

Convertible National Currencies

Currencies are convertible when holders can freely exchange them for other currencies. There are several advantages in using a particular national currency as an international standard of value and as an international reserve asset.  Unlike gold its costs of production and storage are negligible and  the reserve asset is in the same form as the currency used by traders and investors.  The supply can easily be increased or diminished to meet the needs of world trade.

The problem with this facility is that for the other countries to hold convertible currency, the country to which it belongs must be in constant trade deficit because it must import form other countries and pay them in its currency.  But a prolonged deficit will cast doubt on the ability of that country to maintain the exchange value of its currency.  Another problem is that if the country to which the currency belongs devalues the currency, the other countries holding it will lose purchasing power in international transactions.

Posted Date: 11/30/2012 5:26:18 AM | Location : United States







Related Discussions:- Convertible national currencies, Assignment Help, Ask Question on Convertible national currencies, Get Answer, Expert's Help, Convertible national currencies Discussions

Write discussion on Convertible national currencies
Your posts are moderated
Related Questions
Q. What is Data mining? Data mining: Data mining is the process of extracting patterns from data. Data mining is seen as an increasingly important tool by modern business to

arguments in favour of traditional theory of profit maximization

FACTORS RESPONSIBLE FOR WAGE DIFFERENTIALS BETWEEN OCCUPATIONS The major cause is demand and supply for the particular labour concerned, but other causes could be: i.

THE MONETARY ACCOUNT Also called official financing, this comprises the financial transactions of the government (handled by the central bank) needed to offset any net outflow

Q. Explain about Utility analysis? A subset of consumer demand theory which analysis consumer behaviour and market demand employing marginal utility and total utility. Key prin

Indian industry has progressed a lot because of globalization. A lot of development has been seen in Indian industry.

CAPITAL MARKETS Markets in which financial resources (money, bonds, stocks) are traded i.e. the provision of longer term finance - anything from bank loans to investment in pe

Define theVariable factor of production The input level of a variable factor of production can be diverse in the short run. Raw material inputs are believed as variable fact

Controller of Credit The principles of credit control by the central bank were discovered and enunciated after the publication of Bagehot Lombard street in 1873. Even after 187

The production function is Q= 20 K0.5 L0.5 Question: For the production function Q= 20 K0.5 L0.5 determine four combinations of capital and labor that will produce 100 and 200 unit