MODULE 8: FOREIGN EXCHANGE & INTERNATIONAL BUSINESS
Cards (46)
- It is anything people will accept for the exchange of goods and services.
- CHARACTERISTICS OF MONEY
- People must be willing to take an item in exchange for what they areselling.
- If the item being used as money is very plentiful, it will not maintain itsvalue.
- Items used as money should be durable.
- For money to be useful, it should also be divisible.
- As people became more mobile, they demanded a money form thatwas portable.
- WHY IS MONEY USED?
- Money is useful only if people are willing to accept it in exchange for goods and services.
- Money allows us to put a value on various goods and services.
- Money can be saved for future spending.
- The process of converting the currency of one country into the currency of another country.
- The amount of currency of one country that can be traded for one unit of the currency of another country.
- CHANGING VALUE OF CURRENCY
- A measure of the total flow of money coming into a country minus the total flow going out.
- Every nation faces the economic conditions of potential inflation and changing interest rates.
- Companies and individuals want to avoid risk when doing business in different nations.
- It is a medium of exchange in its home country.
- A currency that is not easy to exchange for other currencies.
- Monetary unit that is freely converted into other currencies.
- A system in which currency values are based on supply and demand.
- The network of banks and other financial institutions that buy and sell different currencies.
- A contract a person or company buys that allows the buyer the option to purchase a foreign currency sometime in the future at today’s rate.
- To maintain the value of its currency, a nation may limit the flow of money out of the country.
- They are government restrictions to regulate the amount and value of a nation’s currency.
- A bank whose major function is to provide economic assistance to less developed countries.
- TWO MAIN DIVISIONS OF WORLD BANK
- Makes funds available to help developing countries.
- Provides capital and technical assistance to businesses in nations withlimited resources.
- An agency that helps to promote economic cooperation by maintainingan orderly system of world trade and exchange rates.
- 3 MAIN DUTIES OF THE INTERNATIONAL MONETARY FUND (IMF)
- In an attempt to help countries avoid economic problems, the IMF willmonitor a country’s trade, borrowing, and government spending.
- After analyzing the economic factors of a nation, the IMF will suggest actions to improve the situation.
- When a country has a high foreign debt, the IMF lends money to help avoid major economic difficulties.
- FOREIGN TRADE PAYMENT METHODS
- Making payment before receiving goods or services.
- A financial document issued by a bank for an importer in which the bank guarantees payment.
- This means regular customers have a certain time period to make payment, usually 30 or 60 days.
- Describes the time required for payment and other conditions of a sale on account.
- A certificate representing money borrowed by a company over a long period of time.