Question

What would be the impact on world trade and investment if there were only one, universal currency? What would be the advantages and disadvantages of such an arrangement?

Answer 1

*Answer:

*The valuation of currency of a country is decided on the health of the economy of a country. More the economy is healthier more would be its value and the health of the economy depends upon the fiscal and monetary policies of a country which helps to maintain good production growth and maintain the inflation at control so that the value of a currency would not come down.

*Now with a single currency, it needs to have unique economic polices for member countries and it might create imbalance for exports and imports.

Some of the advantages of a single currency are:
*. Conversion costs of currency can be reduced when people travel to different parts of the world
*. It eliminates of exchange rate uncertainties
*. With the unique policies it helps to maintain transparencies in prices

Some of the disadvantages are:
*. With the single currency the common monetary policy would not support equally for all countries as the economic resource availability is different
*. The external economic shocks would have adverse affects as with the increase in prices of oil it might the growth of the other countries
*. An export and import imbalance could arise because of same currency as the resources used for production varies across the globe

*** Please please like this answer so that I can get a small benefit. Please support me. Please help me. Thankyou***