MONEY AND BANKING Essay Example | Topics and Well Written Essays - 1000 words

MONEY AND BANKING - Essay Example e pursuit of individual advantage stimulates the country by rewarding the ingenuity by using the powers bestowed by nature to enhance efficient distribution of labour (Agur 2008, p. 67-69). The country should specialize of efficient production of goods. The balanced trade ensures high standards of living. The interventions by the government distorting the market incentives may be unambiguously harmful. The tariffs limiting the trade may prevent the benefits exchanges. The trade balance means that losses are as a result of the displacement of people by imports (Agur 2008, p. 67-69). A country should also ensure flexible exchange rates in order to prevent the decline of the currency relative to the trade surplus currency from other countries. Regulating the exchange rates ensures that imports are more expensive to reduce the demand on imports. Also, exports should be at relatively low prices to foreigners so as to increase the demand for exports. The country should also aim at maintain ing the purchasing power parity and balanced trade (Agur 2008, p. 67-69). Part 2 The Foreign exchange markets are involved with the transactions for national currencies. The existent of such markets is influenced by the incorporation of the national currencies to the economy. In the world, the economy uses different currencies hence the need for the foreign exchange markets. Foreign exchange market is an example of exchange normally used in the international currencies decentralized globally. The financial centers around the world act as anchors for trade between different kinds of buyers and sellers. The foreign exchange markets influence relative value for the different currencies. The parties involved in the exchange markets buy another currency using quantity of another currency... From an economic view, trade deficits characterize poor economies. Most of the countries experiencing trade deficits are involved in consistent borrowing from other countries. Borrowing is not among the viable strategies in businesses. Labour unions consider trade deficits as key contributors to unemployment and it that it undermines the future production. The pursuit of individual advantage stimulates the country by rewarding the ingenuity by using the powers bestowed by nature to enhance efficient distribution of labour. The Foreign exchange markets are involved with the transactions for national currencies. The existent of such markets is influenced by the incorporation of the national currencies to the economy. In the world, the economy uses different currencies hence the need for the foreign exchange markets. Foreign exchange market is an example of exchange normally used in the international currencies decentralized globally. The financial centers around the world act as anchors for trade between different kinds of buyers and sellers. The stance of the monetary policies in industrialized countries has been inconsistent in bringing the value of foreign exchange currency back to its average value. This assumes the depreciation of the policies on the exchange currencies. The restriction of intervention in influencing the value of the exchange currency and the policy on intervention was consistent with the macro economy needs, and this led to the increased conflicts between the monetary policy stance and the use of intervention.