Over the past century, the political and economic map of the world has changed more than once. The world economy has also gone through many transformations. The gold standard, after the Second World War, was replaced by a gold and exchange system, and, finally, a system of floating exchange rates has now been established in most countries.
Instructions
Step 1
The meaning of this new system is that the exchange rate of a particular currency is determined based on the ratio of supply and demand for it. Similar to how the price of securities on the stock exchange is determined.
Step 2
In practice, this happens as follows: if the demand for the goods of a country abroad grows and, accordingly, this country increases its exports, then along with it the demand for the currency of this country to pay for international trade transactions grows. If, at the same time, the country's import does not increase to the same extent, which means that the demand for other currencies does not increase, then an imbalance arises - the demand for the national currency exceeds the supply. In turn, this will lead to the fact that the value of this country's currency will rise and its rate against other currencies will go up.
Step 3
Thus, if the volume of imports in Russia exceeds exports, then the supply of rubles in the foreign exchange markets will exceed the demand for them, and the result is that the ruble exchange rate will begin to fall.
Step 4
It is generally accepted that the floating exchange rate system has an undeniable advantage over its predecessors - it makes it possible to correct trade deficits without government intervention. But not all countries let their exchange rate go by itself.
Step 5
In order to avoid sharp jumps in the exchange rates of their national currencies, they carry out what economists call foreign exchange interventions. When the exchange rate of the national currency falls, the government, at the expense of special state funds, buys it. And then, when the rate rises, it sells it in the foreign exchange markets. But even these measures are often ineffective, because in the conditions of the global economic market it happens that a significant part of the national currency may be outside the country and the government is simply unable to influence its holders.
