Question

In an essay of at least three well-developed paragraphs, (a) explain one economic difficulty for people traveling and conducting business between countries, and (b) describe the two exchange rate systems and how they function in alleviating these problems.

Answer 1

One main reason would be the distance between the two country's, this could be very expensive depending on how far apart the countries are apart. Another conflict is the country currency, for instance 1 dollar in america could only equal 50 cent in japan. in order to purchase things in another country america would have to convert their money into the country they are try to buy money. One exchange rate is known as the flexible exchanged rate, in this system the exchange rate is calculated by supply and demand, the exchange rate in this system reflect the market. The fluctuations in currency values are only based day to day and they can change the amount of imports and exports. The other exchange rate is fixed exchange rates, in this system the governments are consistent with keeping the currency values similar to other governments. This particular system make trading easier. The only problem found in this system is that it keeps a lot of pressure n the supply and demand which is the reason why currency why values change.