34.1 Financing International Trade

MyEconLab Concept Video

When Apple, Inc. imports iPods manufactured in Taiwan, it pays for them using Taiwanese dollars. When a French construction company buys an earthmover from Caterpillar, Inc., it uses U.S. dollars. Whenever we buy things from another country, we pay in the currency of that country. It doesn’t make any difference what the item being traded is; it might be a consumption good or a service or a capital good, a building, or even a firm.

We’re going to study the markets in which different types of currency are bought and sold. But first we’re going to look at the scale of international trading and borrowing and lending and at the way in which we keep our records of these transactions. These ...

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