How do exchange rates affect businesses?
In two ways.First, direct impact. This will happen in three cases:If the business buys any products from another country. The cost of those products will change if the exchange rate changes.If the business sells any products to a foreign country. The sale price (and therefore profits) will change if the exchange rate changes.If the business has borrowed money from, or lent money to, someone in a foreign country. The amount to be repaid, and the interest amount, will change if the interest rate changes.That was the direct impact. There is also an indirect impact. No business is an island - it depends upon other businesses which might be affected by exchange rates. For example, a UK business which neither sells nor buys nor borrows from another country. However, it uses trucks to move it's products around the country. If the foreign exchange rate changes, the cost of the fuel those trucks use changes (because it is imported from abroad) and that affects the costs of the business … this is an example of indirect impact.
How does the U.S. national debt affect most American citizens?
Useful graph at the beginning of this article Page on gfmag.com Quick statement, US (all) governments debt has risen from 86% GDP pre-2008 crisis to 114% now. For comparison, Canada is now at 86%, Greece is at 200%. Two problems in US are 1) the current federal budget is in serious deficit, 4% of GDP per year, with no plan in place to reduce that. By comparison, Canada's federal budget is at 2.8% of GDP with a plan in place to have the budget balanced by 2015 or 16. 2) There appears to be no likelihood of a plan being implemented anytime soon to get the budget to balance. Canada's governments collect about 37.7% of GDP in taxes, the USA about 22% (CIA Factbook) The World Factbook . (These figures are highly suspect. Other sources such as Heritage Fund place those two figures at 32.2% and 26.9% resp. I believe CIA figures for USA ignore state and local taxes List of countries by tax revenue as percentage of GDP ). Points to make. USA total tax burden is so much lower than in any other developed country (nearest is Canada, EU countries typically Portugal 37%, UK 39%, Germany 40.6%, France 44.6%, Norway 46.3%) If USA brought its tax burden up to even just below its next nearest competitor Canada at 32%, even if only until the debt was back down to a safe level, say around 50% GDP, then dropped it back to where the budget balanced, there would be no more concern from international lenders. This would clearly be a move to bring things back into rational balance, and should be promoted to voters as a necessary emergency measure.There is clearly not enough waste in any US governments to re-balance the deficit and reduce the debt to a safe level. Not even any tea-party candidate has proposed any cut which could do that. A large majority of US voters appear to want to keep the US military system funded as it is. So there is really no other option. Either increase taxes to cover expenses, or continue down this rabbit hole.
How might a budget deficit affect the balance of trade?
a. A budget deficit reduces interest rates, which reduces exchange rates and reduces the balance of trade. b. A budget deficit raises interest rates, which raises exchange rates, and increases the balance of trade. c. A budget deficit raises interest rates, which raises exchange rates, and reduces the balance of trade. d. A budget deficit reduces interest rates, which raises exchange rates, and reduces the balance of trade.
Why are currency values different from country to country?
Money is not static but its value keeps changing with the society and its economic conditions. One rupee in 1947 is not the same as one rupee today, both in terms of appearance and purchasing power.Every currency in the world does not have equal value. Some are greatly valuable; some are fairly valuable. One US Dollar ($1) for example, is not equivalent to an Australian or Canadian Dollar. Euros and Pounds are worth different amounts and so on.When a new country is formed or gets freedom. It launches its own currency. But a country may need to buy from other countries i.e import goods or sell to other countries i.e export goods. Imagine that you are buying something from a company in China, and you live in America. Chinese company needs to be paid in renminbi, which is their local currency but you have dollars, so there needs to be some way to convert between the two. If you have $100 but you need renminbi you want to try to get as many renminbis for your $100 as you can. This is where currency exchange comes in.The value of a country’s currency is largely decided by market forces and is linked with its economic conditions and policies such as economic stability, inflation, foreign trade, employment, interest rates, growth rate and geopolitical conditions.The numerical value of a currency is different from its trade value. The strength or popularity of a currency is an entirely different thing. A Euro or the USD is traded more and is used in more countries than the Kuwaiti Dinar even though KWD is valued as the highest currency in the world.Highest Value of Currency in the World in 2018 in INRThe foreign rate of currency changes from time to time. International exchange rates of currencies are dependent on mostly the market forces of demand and supply. Nearly all countries follow a floating exchange rate to determine the value of their currencies against other currencies.As explained in the article What is Currency? Why does Currency Value change?The value of INR against USD depreciated from 4.76 in 1950 to 72.88 in September 2018. The INR has depreciated 1419 per cent against USD in the last 70 years
Why isn't there one single world wide currency?
Because there are different countries with different economic systems (capitalism, socialism, communism or any combination of these three), with different political systems (democracy, autocracy, authoritarianism, theocracy or any hybrid thereof) but most importantly, with different self-interests. Unless of course, two or more countries agree to unify their respective economies and one very good example is what happened to most of Western Europe through the European Union by introducing its own unified currency called 'euro'. If you look deeper among its members, you'll find the commonality that all have a democratic form of government with an economic system that is basically and fundamentally capitalistic.