On of the distinguishing features of international trade is the involvement of foreign currencies . if a seller in Dubai sells goods to a buyer in Abu Dhabi he is paid in local currency because they both are residents of one country .
If a buyer in France buys goods from a seller in U.S.A. the problem of foreign exchange exits, because the buyer wants to pay in France currency and the seller wants to receive his money in US Dollars.
Because different nations use different currencies every economic transaction between a resident of one country and a resident of another, necessarily require the exchange of one currency into another.
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