U7DB1—Your response should be at least 150 words in length--Suppose all countries in the global
economic agreed to use a common currency that was administered by an independent organization. What
would the advantages and disadvantages be? U7DB1R-- Your response should be at least 150 words in length --One advantage this would be all countries would be on one accord. We would know how much the currency is and it would make
it easier to process at the bank. The next advantage it would make the exchange the same. When
dealing with different countries, the exchange rate is different. Some are higher than others are.
One of the problems with trading with other countries is that you never know which way the
exchange rate will move. It may move in your favor, but it could equally move against you and
end up costing you a lot more. This sort of uncertainty can hinder trade - particularly for smaller
firms. A single currency gets rid of all this uncertainty within the single currency zone, and
should encourage trade (within the zone).
A disadvantage is Transition costs - moving into a single currency economic union involves
short-term transition costs (which would disappear once the new currency was fully
established). For example, new money has to be issued and the old withdrawn, vending
machines have to be adapted to take the new coins, and foreign exchange departments may
shrink in size in some financial institutions. A single currency requires a single monetary policy.
This means interest rates being set centrally for all Euro countries. Say an individual country is
suffering a downturn in economic activity, but the rest are booming. The European Central Bank
may want to increase interest rates, but that would simply worsen the recession for that country. U7AQ1-- Your response should be at least 500 words in length--Describe the key factors in foreign
exchange market. Explain risk and liquidity as they relate for foreign exchange market. U7AQ2-- Your response should be at least 500 words in length -- What is covered interest parity? What
are the two assumptions of covered interest parity? How do investors use covered interest arbitrage to
maximize their investment returns?

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