Question

Nternational trade requires a system for exchanging currency among nations because different countries have their own forms of ___ . the ____ for different currencies allows goods to be traded fairly between countries at equivalent prices.

Answer 1

International trade requires the foreign exchange market for converting different national currencies, enabling fairness in trade, and determining exchange rates for equal value transactions.

Step-by-step explanation:

International trade requires a system for exchanging currency because different countries have their own forms of currency. The foreign exchange market is where people and firms can convert one currency to another, which enables international trade and investment activities. Nations like Ecuador, El Salvador, and Panama use the U.S. dollar, while 17 European countries share the euro. However, most international transactions involve multiple national currencies, necessitating the need for exchange rates that determine the relative price of currencies. Exchange rates allow goods to be traded fairly between countries at equivalent values and are influenced by various factors including trade flows, monetary policy, and government regulations.