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
100 schools are given exactly one million dollars each in grant money. They can spend the money on any or all of three programs: math tutoring (math), kickball lessons (kickball),

The owner of a patent has a contract with a cooperation that gives it right to use the patent. The cooperation will pay the patent owner $2500 yearly for the next 5 years, $3000 fo

The variance of the OLS estimator is VAR( ^B)=σ 2 /ns 2 x , where   s 2 x =£x 2 /x You're hired to estimate   and you're going to be paid according to the accuracy of your esti

Decrease in Demand At the initial equilibrium price P 1 , quantity demanded falls from q 1 to q d .  But the quantity supplied is still q 1 at this price.  Hence, this

What is the equilibrium in the labor market? Explain briefly. Equilibrium in the Labor Market a. The market labor of demand curve is the horizontal total of the individual l

managerial principles to consider when determining level of output of afirm

Using Total Expenditure for Calculating National Income The expenditure approach centres on the components of final demand which generate production.  It thus measures GDP


NOMINAL RIGIDITIES VERSUS REAL RIGIDITIES    Nominal rigidities are said to exist when nominal prices and wages  do  not change in  the  face  of  conditions that call for thei

LONG RUN EQUILIBRIUM FOR THE FIRM Since there is freedom of entry into the industry the surplus profits will attract new firms into the industry.  As a result the supply of th