Q1. Do all international financial t... [FREE SOLUTION]

Chapter 21: Q1. (page 450)

Do all international financial transactions necessarily involve exchanging one nation鈥檚 distinct currency for another? Explain. Could a nation that neither imports goods and services nor exports goods and services still engage in international financial transactions?

Short Answer

Expert verified

Yes, all international financial transactions necessarily involve exchanging one nation鈥檚 distinct currency for another.

International financial transactions can still occur even if there is no import and export of goods and services.

Step by step solution

International financial transactions

International financial transactions fall into two broad categories; international trade and international asset transactions.

All cross-border purchases and sales of currently produced goods and services are called international trade. This involves exchanging one nation鈥檚 distinct currency for another.

. Thus, money flows from the buyers of the goods, services, or assets to the sellers of the goods, services, or assets.

So, one can say that all financial transactions necessarily involve exchanging one nation鈥檚 distinct currency for another.

International asset transactions

All cross-border purchases and sales of real or financial assets in which the property rights to those assets are transferred from a citizen of one country to a citizen of another country are called international asset transactions.For example, international asset transactions include selling a business to foreign investors and purchasing a vacation home from a local citizen in another country.

Thus, even without the import and export of goods and services, international financial transactions can still occur.