How can international trade be affected by currency conversion?

Question

Responses

A It costs a significant amount of money to exchange one currency for another.It costs a significant amount of money to exchange one currency for another.

B A country with a strong currency value can take advantage of a countries resources if it has a much weaker value.A country with a strong currency value can take advantage of a countries resources if it has a much weaker value.

C All countries trade using the US dollar so it does not impact international trade.All countries trade using the US dollar so it does not impact international trade.

D Currency conversion is not a factor for counties that have free trade agreements

Answer 1

The most accurate response regarding how international trade can be affected by currency conversion is:

B. A country with a strong currency value can take advantage of a country's resources if it has a much weaker value.

This is because a strong currency can make imports cheaper and exports more expensive for other countries, influencing trade balances, competitiveness, and overall trade relationships.

The other options have inaccuracies:

• A is partially correct in that there are costs associated with currency exchange, but it doesn't capture the broader implications on trade.
• C is misleading; while the US dollar is commonly used in international trade, not all transactions are conducted in dollars.
• D is incorrect; free trade agreements do not eliminate the need for currency conversion, as countries may still deal with different currencies.