Question

Why is a system of currency exchange necessary for international trade? A) Nearly all world currencies are worthless on the world market. B) Those buying goods on the world market only accept payment in gold and silver. C) Most goods bought on the international market must be bought and paid for using United States dollars only. D) There must be a way to pay for goods purchased from countries with different types of currencies due to Nationalism

Answer 1

D) There must be a way to pay for goods purchased from countries with different types of currencies due to Nationalism.

Answer 2

The correct answer and the reason why there is a system of currency exchange necessary for international trade is D) There must be a way to pay for goods purchased from countries with different types of currencies due to Nationalism.

We need an International Exchange Rate of Foreign Exchange Rate (FX) because multiple countries use different types of currency. We need this FX in order ot import or export goods since every country has the sovereignty to establish its currency. If we didn't have a system of currency exchange, economies would be limited to their national context.