The Monetary and Financial Systems
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9.4 Describe the monetary and financial systems.
We have seen how currencies facilitate international transactions and how exchange rates affect the amount of international trade. Let’s now examine the two systems that determine exchange rates: the international monetary system and the global financial system.
International Monetary System
Firms seek to be paid for the products and services they sell abroad. Portfolio investors seek to invest in stocks and other liquid assets around the world. The resulting monetary flows take the form of various currencies traded among nations. Accordingly, the international monetary system consists of the institutional frameworks, rules, and procedures that govern how ...
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