Monetary System - Essay Example

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Monetary System

In. order to compensate with the needs, they have to buy currencies which are more recognized in the world and with this, they need a larger volume of their monetary resources in which they will have to spend tremendous amount just to meet or purchase a certain currency. By doing so, the value of their currency will be more likely affected and it may cause sudden change of the prices of basic goods and commodities. To add to that, if they do have a lesser monetary value, that certain country might resort in money in some monetary agencies in both local and international. Having this practice will ease or lessen the burden of a certain country with regards to their monetary scheme. However, if that certain debt would not be paid off immediately or given proper attention, then it would be another factor in weakening the value of a certain currency. The concerned country will further focus in paying off their debts and with this it will also need tremendous amount of money in terms of payment of the principal as well as the interest. If the concerned party would pay for their debts, it will need tremendous amount of money and the inflation rate would also rise, as the value of their money would be further weakened. ...Show more

Summary

A certain government has the right to have its own currency. By doing so, it opens its doors to the world economic scenario. This would mean that their currency is available for the exchange of other currency that is much recognized by the world market in purchasing goods and services…
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