Question

Explain how remittances from migrant workers create purchasing power in other countries. Why do migrant worker send remittances? What happens with this money?

Answer 1

Answer:

a) Migrant workers send monies as gifts to their relatives in their home countries, they increase the purchasing power of their relatives. More money equals more purchasing power. This purchasing power is futher magnified by the (in many cases) huge difference in purchasing power between the currency in the migrants home country and the country of temporary residence.

b) migrant workers send remittances in order maximize the added purchasing power afforded by the huge variances in exchange rate. These monies sometimes are gifted to family members to help them or for some other project to be executed on behalf of the migrant.

c) the money is either used by the recipient for their own purposes in the case of a gift or used for the execution of a project on behalf of the migrant. Projects may include setting up a business, building a house or purchasing a property etc.

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