International businesses with markets and production facilities in other countri

Question

International businesses with markets and production facilities in other countries, or that use materials from different countries need to understand the ways and rates at which currency is converted. Countries may operate using different exchange rate regimes, all of which have different advantages and disadvantages. Governments around the world pursue a number of different exchange rate policies. No one exchange rate system is universal, and the international monetary system is continually emerging. One key factor an international business must consider when looking at foreign markets is how the currency will be converted into the home-country currency. Because the foreign exchange market is so volatile, the firm needs to understand the advantages and disadvantages of each regime.

Reduces uncertainty Uncertainty Fluctuation with limits Argument for Argument Against Limited options Floating exchange rate Fixed exchange rate Managed-float Pegged exchange rate Target Zone Difficult No uncertainty Unknown elements Government adjusts Market-based Continual government intervention

Explanation / Answer

Argument For Argument Against Floating exchange rate Market based uncertainty Fixed exchange rate No uncertainty Continual government intervention Managed Float Reduces uncertainty Difficult Pegged exchange rate Government adjusts Limited options Target zone Fluctuation within limits Unknown elements

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.