Economics Essay Example | Topics and Well Written Essays - 1500 words - 4

Economics - Essay ExampleIndeed, the currency supercede sum up policy mustiness be geared towards leveling the global financial playing field. The prior Bretton Woods agreement and the accepted United Kingdom governments policy determined the nations currency exchange come in. The variance in the United Kingdom currency in relation to another(prenominal) countrys foreign currency whitethorn translates to either a currency fluctuation gain or a loss. Romain Veyrune (2007) reiterated the fixed exchange rate system is defined as a pegged exchange rate. The exchange rate of the nations currency is matched to another nations currency. Likewise, the nations currency may also be matched with a precious metal like Gold. The main purpose of the unique financial rating system is to make the nations currency stable, the British pound, in relation to another countrys pegged currency or precious metal. One of the major purposes of the fixed exchange rate system is to stabilise trading betwe en the two nations. Many companies can make predicting the current and future(a) sales, procures, and other currency related transaction between country with the currency that is pegged against the other nations currency and the country whose currency is used as the basis for the nations currency. ... The electronic currency, e- property, effectuate in the internet website, www.e-gold.com, is an internationally accepted currency that is pegged or fixed on the observe of gold at the time of each sale or purchase of goods or services. Here, the persons reception of 20 e-gold currency is pegged the average world market price of gold. As the gold value increases, the value of the 20 e gold currency amount increases as the gold value decrements, the value of the 20 e gold currency amount decreases. Thus, the value of one e-gold may increase or decrease depending one world value of gold or the penury value of another nations currency. Fernando Goncalves (2008) opined the floating e xchange rate system is grounded on the sparing supply and take in of the nations currency in relation to the currency of another nation. Under this system, the currency exchange rate varies depending on the economic situation at the time of the exchange. Under the demand economic principle, the increase in the demand for one currency increases the value of such currency. On the other hand, Callum Henderson (2006) reiterated a decline in the demand for a certain currency generated a decline in the value of such currency. In laypersons terms, a Chinese having a strong need to use the American dollar to purchase American may be willing to buy or exchange RMB 10 for each American dollar. On the other hand, the American having a strong need to buy or get the Chinese currency, Yuan, can be willing to exchange one American dollar for only RMB 7 for each American dollar. The British pound is based on the fluctuating or supply and demand economic pricing policy in