Currencies have prices in terms of other currencies {exchange rate}| {monetary exchange}. Currency-value changes can restrict money flow.
World economies trade currencies in special markets {foreign exchange market} {foreign exchange}|.
Countries can try to keep exchange rates stable but can change rates if necessary {adjustable peg system}. Countries can maintain exchange rate and maintain certainty for businesses, but this does not allow monetary policy. Countries can let exchange rate float freely and independently use monetary policy, but this causes uncertainty for businesses.
Colony or state currency can be a multiple of another country's currency {currency board}. Colony or state must have enough other-country currency in reserve to cover all outstanding currency.
USA has money {Exchange Stabilization Fund}, to buy and sell in foreign-exchange markets.
Formerly, world economy transferred gold to back currencies {gold standard}|.
6-Economics-Macroeconomics-International Trade
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Date Modified: 2022.0225