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CHAPTER 9CHAPTER 9Money and BusinessMoney and Business

INTERNATIONAL RELATIONS

Seventh Edition

Joshua S. Goldstein

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The Currency SystemThe Currency System

• Hard or convertible currencies

• Fixed exchange rates

• Floating exchange rates

• Managed float system

• G7 states

• Inflation

• Hyperinflation

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Inflation Rates by Region, 1993-2004Inflation Rates by Region, 1993-2004

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Why Currencies Rise and FallWhy Currencies Rise and Fall

• Strong and weak currencies

• Overvalued currencies

• Devaluation

• Central banks

• Discount rate

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The World Bank and the IMFThe World Bank and the IMF

• 1944, The Bretton Woods System• World Bank, source of loans• International Monetary Fund, maintain stable

currencies• U.S. Dollar backed by gold until 1971• Special Drawing Rights (SDR)• Balance of payments• Foreign direct investment• International debt

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The Position of Various RegionsThe Position of Various Regions

• The United States

• National debt

• Russia

• Declining GDP

• Asia

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U.S Financial Position, 1970-2004U.S Financial Position, 1970-2004

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Economic Collapse in Russian and Eastern EuropeEconomic Collapse in Russian and Eastern Europe

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Multinational Corporations (MNCs)Multinational Corporations (MNCs)

• Industrial, financial, and service corporations

• Foreign direct investment

• Offering incentive for investment

• Risk assessment

• Stability

• Corruption