Introduction•The economies of the world have become increasingly interdependent.•Economic events in one country can have repercussion on the economies of other countries.
•International trade is a major part of today’s world economy. Why?
What is ER?
The World Monetary System•The world monetary system has been changed several times by international aggrements and events.•Early in the century, nearly all currencies were backed by gold which determined their values in international trading.
Balance of Payment•BoP – the record of a nation’s transactions with the rest of the world.-Goods-Services-Assets•BoP is divided up into two major accounts:-Current account-Capital account
Current Account•Items in the current account:-Trade account-Services account-Transfer payments account
Capital Account•Items in the capital account:-Long-term capital account-Short-term capital account-Capital of adjustment account-Net change in international reserve-Special drawing right (SDR) allocation-International Monetary Fund sources