Political Science 2231E Chapter Notes - Chapter 9: Hard Currency, Devaluation, Mercantilism

• School: Western University
• Department: Political Science
• Course: Political Science 2231E
• Professor: Nigmendra Narain

Document Summary

Financial integration has tremendous benefits: offers investors and businesses access to overseas markets to spur economic growth. It allows for the possibility of better returns on investments for individuals investing for college tuition or retirement: also carries risks: An economic crisis in one state can quickly spread to another country. Can lead to a global economic crisis. The a(cid:271)ilit(cid:455) to pri(cid:374)t o(cid:374)e"s o(cid:449)(cid:374) (cid:272)urre(cid:374)(cid:272)(cid:455) is o(cid:374)e of the hall(cid:373)arks of so(cid:448)ereig(cid:374)t(cid:455) International economies are based on national currencies, not a world currency. National currencies are valued against each other. Exchange rates define how many dollars of one nation are equivalent to another nations dollar. Most ex(cid:272)ha(cid:374)ge rates are e(cid:454)pressed i(cid:374) ter(cid:373)s of the (cid:449)orld"s (cid:373)ost i(cid:373)porta(cid:374)t (cid:272)urre(cid:374)(cid:272)ies: us dollar, yen, eu euro. The relative values of currencies at a given point in time arbitrary; only the changes in values over time are meaningful.