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Option A. Countries involved in the international trade must know the value of each other's money. The need for an International Currency System is because international transactions with different currencies are linked to an economic reality of each country with different measures and prices or exchange rates of each country. The different types of currencies depend on the supply and demand of each currency, regulated by national central banks that control the fluctuations of each currency. This system works like the exchange of currencies of one currency for another for the acquisition of different currencies and commercial transactions.
Answer:
Global trade makes it possible for people living in one country to use products from another country, allowing them to benefit from products that are not domestically produced. If a country is endowed with abundant labor or favorable climatic conditions, it has an advantage over the nations that do not have them. It makes economic sense to produce and export goods that other countries cannot produce as cheaply. This way, the exporters can increase sales with foreign commerce and strengthen their country’s economy, while earning profits at the individual level. It also helps strengthen the foreign currency reserves of the country.
International trade is a key driver in regulating foreign currency rates. Global trade helps balance a country’s cyclical pattern of trade deficit and surplus. When a country’s currency is strong, its imports tend to exceed its exports, thus creating a trade deficit for the importer. This situation leads to the exporter country’s currency strengthening and the importer’s currency eventually weakening. Over time, a role reversal happens with exports overtaking imports, thus strengthening the exporter’s currency and creating a trade surplus for the importer. Many other factors influence this cycle too, for example, product cost inflation and interest rates. Global trade removes boundaries and makes the whole world into a single marketplace, and that can work to the benefit of all the participating partners.
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