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Money is a token that is widely accepted as a medium of exchange. The token can be tangible like a coin or note, or intangible like a bank deposit.
Understanding Money
Money
Representative Money Physical tokens (coins, certificate etc) that can be reliably exchanged for a fixed quantity of a commodity such as gold
Fiat Money Intrinsically worthless, inconvertible token endowed with special status by the government to make them viable as money
Understanding Money
Exchange Rate
Exchange rates are quoted as foreign currency per unit of domestic currency or domestic currency per unit of foreign currency.
How much can be exchanged for one euro? 102/1 How much can be exchanged for one yen? 0.0098/1
Exchange rate allow us to denominate the cost or price of a good or service in a common currency.
How much does a Honda cost? 3,000,000 Or, 3,000,000 x 0.0098/1 = 29,400
Import demand
Export demand
Productivity
In the 19th and early 20th centuries gold played a key role in international monetary transactions. The gold standard was used to back currencies; the international value of currency was determined by its fixed relationship to gold. 19th Century Gold Standard 1 oz of gold = $20 = 4
Liberty Gold Dollar (1849-1854)
1 = $5
1960s inflation hit US resulted in President Nixon Closes the Gold Window in year 1971 Nixon refuses to honor agreement signaling the beginning of the end of fixed exchange rates.
In 1997 speculative short-selling of the Malaysian currency The value of the ringgit dropped from MYR 2.50 per USD to MYR 4.80 per USD. Bank Negara imposed capital controls and pegged the Malaysian ringgit at USD 3.80. The fixed exchange rate was abandoned on July 21, 2005. The Ringgit was made into floating system but to be traded with strict permission from Bank Negara.