Chapter 6. International Finance and Trade

Chapter Learning Objectives:


  • Explain how the international monetary system evolved and how it operates today.

  • Describe the efforts undertaken to achieve economic unification of Europe.

  • Describe how currency or foreign exchange markets are organized and operate.

  • Explain how currency exchange rates are quoted.

  • Describe the factors that affect currency exchange rates.

  • Describe how the world banking systems facilitate financing of sales by exporters and purchases by importers.

  • Identify recent developments in the U.S. balance of payments.

Where We Have Been. . .

In Chapter 5, you learned how the Fed operates in conjunction with governmental policy makers (the president, Congress, and the U.S. Treasury) in the common effort of trying to achieve the goals of economic growth, high and stable employment levels, price stability, and a balance in international transactions. You now understand policy instruments of the Treasury and how the national debt is managed. You also learned how the money supply is expanded and contracted and the importance of the monetary base and money multiplier in setting monetary policy.

Where We Are Going. . .

In Part 2, we focus on developing a better understanding of the area of investments including how securities are valued and how securities markets operate. Chapter 7 examines how savings are directed into various investments, and Chapter 8 discusses how interest rates, or the ...

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