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imagesHAPTER OVERVIEW

  1. HISTORICAL ROLE OF THE U.S. DOLLAR
  2. DEVELOPMENT OF TODAY'S INTERNATIONAL MONETARY SYSTEM
  3. FOREIGN EXCHANGE AND FOREIGN EXCHANGE RATES
  4. BALANCE OF PAYMENTS
  5. ECONOMIC AND FINANCIAL TURMOIL AROUND THE WORLD
  6. MARKETING IN THE EURO AREA

When international transactions occur, foreign exchange is the monetary mechanism allowing for the transfer of funds from one nation to another. The existing international monetary system always affects companies as well as individuals whenever they buy or sell products and services traded across national boundaries. For example, due to the stronger yen compared to the U.S. dollar in early 2008, Japanese multinational corporations, such as Toyota, reported a reduction in their profits as these companies' overseas businesses in the United States collect sales in U.S. dollars but report profit in Japanese yen. Every 1 yen increase in the Japanese currency relative to the U.S. dollar is expected to trim Toyota's operating profit by around 35 billion yen (which would amount to a whopping $350 million at 105 yen/$).1 It is obvious that the current international monetary system has a profound impact not only on individuals and companies but also on the U.S. balance of payments at the aggregate level.

This chapter examines international trade in monetary ...

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