Berkas Jawaban
Name : Nuri Resqiyanti NPM : 223403067 Class : Accounting A
Subject: International Business
1. What is the function of the international monetary system?
Answer:
The international monetary system is the operating system of the global financial environment. This body comprises investors, multinational companies, and financial institutions. The International Monetary System formulates the framework that facilitates the exchange rates, international payments, and movement of capital between two countries with different currencies.
The prerogative of the International Monetary System is to facilitate the exchange of capital, goods, and services between countries. The International Monetary Fund (IMF) oversees articles of the agreement signed in this regard between countries. The responsibility of member countries is to formulate economic and financial policies that facilitate the economic and financial conditions to ultimately result in economic growth by maintaining price stability.
The functions of the International Monetary System through the points below:
a. Facilitates the free flow of different currencies in the open market.
b. Restrict intervention from government or central banks only in cases of currency stabilization.
c. Facilitate global trade of goods, services, and money.
d. Maintain a system that regulates the exchange rates through the forces of the market and not by any particular institution or organization.
2. What was the initial goal of the World Bank?
Answer:
The World Bank is an international organization that provides financial assistance and advice to countries in need. The purpose of this institution is to help developing countries develop plans to build infrastructure and economies as a way to reduce poverty and improve the lives of their people.
However, the initial goal of the World Bank was to organize finance, reconstruct, build infrastructure and to provide financial assistance to countries that suffered losses due to World War II. From reconstructing and rebuilding countries affected by World War II, the Bank's objectives have shifted over time. The World Bank's funding objectives are now more directed towards infrastructure projects such as irrigation, road infrastructure and electricity.
The World Bank consists of two institutions, the International Bank for Reconstruction and Development and the International Development Association.
3. Describe the differences between a fixed exchange rate system and a flexible exchange rate system!
Answer:
An exchange rate regime, also known as the pegged exchange rate, wherein the government and central bank attempts to keep the value of the currency is fixed against the value of other currencies, is called fixed exchange rate. A monetary system, wherein the exchange rate is set according to the demand and supply forces, is known as flexible or floating exchange rate.
Difference between fixed and flexible exchange rates is concerned:
a. The exchange rate which the government sets and maintains at the same level is called fixed exchange rate. The exchange rate that variates with the variation in market forces is called flexible exchange rate.
b. The fixed exchange rate is determined by government or the central bank of the country.
On the other hand, the flexible exchange rate is fixed by demand and supply forces.
c. In fixed exchange rate regime, a reduction in the par value of the currency is termed as devaluation and a rise as the revaluation. On the other hand, in the flexible exchange rate system, the decrease in currency price is regarded as depreciation and increase, as appreciation.
d. Speculation is common in the flexible exchange rate. Conversely, in the case of fixed exchange rate speculation takes place when there is a rumour about change in government policy.
e. In fixed exchange rate, the self-adjusting mechanism operates through variation in the supply of money, domestic interest rate and price. As opposed to the flexible exchange rate that operates to remove external instability by the change in forex rate.
