Using examples of the currencies of at least two (2) countries, compare a convertible currency to...

Using examples of the currencies of at least two (2) countries, compare a convertible currency to an inconvertible currency, focusing on challenges faced by the country that has the latter

Expert Solution

First I will explain Convertible and Inconvertible currency after that we will comapre both through example .

Convertible Currency - A currency that can be easily bought or sold without any intervention of the goverment in order to purchase another currenecy . in other word currency that can be easily traded on Foreign exchange . Convertible currency is also known as hard money means easily available .

Inconvertible Currency - A currency that can not be bought or sold in order tto purchase another currency. In other word currency that can not be traded on the foreign exchange .

Now take US dollar is the convertible currency and the currency of the North korea as inconvertible

Convertible Currency Inconvertible Currency. Normally in socilist and Ferderal Economy. Seen in Authorative Economy like North Korea, Cuba Like USA, South Korea etc.

Help in international Trade Because of non convertiblity not much help International trade of USA in 2018- 19 was $805.5 billion Int. trade of North korea in 2018-18 $3 billion

More liquid which reduce volatility Highly unliquid which make currency more volatile

Because of Less volatile attract more foreign investment Highly volatile less foreign investment. Foregin investment in USA in 2019 is $4.13 trillion. Foregin ivestment in Northkorea is negligible . Sign of stable and mature economy Help regulators protect currency investor from risk

Better access to Goods and Service Lack of variety goods and service people of USA have more choice . People of North korea mainly rely on domestic goods.

Progress in multiple Industry due to high flow of FDI. Underdeveloped industry mainly traditional one In 2019 USA has 72 well developed industries In north korea is 13

Higher Per capita Income Low Per capita Income. PCI in USA is $55809 PCI in North Korea is $1300

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