Explain one side or the other.
2007-02-05 14:55:07 · 5 answers · asked by Charles R 1 in Social Science ➔ Economics
No, it is based on the attractiveness of investment/consumption in the country noted.
The dollar has value because you need a dollar to purchase US assets.
If no one abroad wanted to invest here, there would be no demand for dollars on the foreign currency markets.
2007-02-06 01:30:19 · answer #1 · answered by Anonymous · 1⤊ 0⤋
I guess you are thinking about the value of money, how much can a USdollar buy vis-a-vis an Indian Rupee for example.
In general, I'd say no.
The value of money is determined by what people expect the money to be worth. If yu economy is doing good, and is expected to continue doing good, then the value of your money goes up.
However, there could be an exception, and that is the US dollar.
The US runs huge budget deficits that they finance by selling bonds; foreign governments buy these bonds. One reason for that is that the USdollar is a reserve currency, that is, many countries keep their reserves (akin to a country's savings) in terms of USDollars.
Now, in general, you would expect a country who keeps running budget deficits not to have great economic prospects. But this reserve currency status allows the US to continually issue bonds, and foreign governments to continually buy them, financing the US economy.
The question is why is the US the reserve currency. The reason is historic. But then why is it still the reserve currency today.
Some people have suggested that one of the 'sins' of Saddam Hussein was to try and sell Iraqi oil for Euros rather than dollars. That woud have encouraged countries to keep Euros in reserve, thereby undermining the status of the US dollar, and threatening the system.
If that was the case, then you can say that the value of the US dollar is indeed back by military might.
But I'd add that it's not only military might (the rouble wasn't worth much even at the height of the USSR), but the willingness to use that might matters too.
2007-02-06 00:55:42 · answer #2 · answered by ekonomix 5 · 1⤊ 0⤋
Money is a medium of exchange, a unit of account and a store of value. Economic terms can be vague. You seem to be very curious about money. Remember that what matters is what a country produces in terms of goods and services. That's what economics is interested in: who produces what and who gets what. Money is a way of entitling people to a share of these goods and services. Bill Gates could take a huge bite out of the world's goods and services; I could only take a nibble.
Do you really mean, "Does a good military make a country richer?"
Richer countries have more military might, usually. Mainly the relationship runs in the following direction: having more money allows a country to have a good military. However, since a military can get you oil from overseas; and since having a huge military stimulates a military-industrial complex, which may lead to rapid economic growth, perhaps the relationship can run in the other direction: military might makes a country richer.
2007-02-05 23:31:43 · answer #3 · answered by rage997_666 2 · 1⤊ 0⤋
Not necessarily...nobody in the Soviet Union aside from the head honchos was rich and yet they managed to maintain one of the most powerful military forces in the world for 40+ years...
2007-02-05 23:04:53 · answer #4 · answered by dardekkis 4 · 0⤊ 0⤋
Certainly not. One word," SWITZERLAND "
2007-02-09 13:43:41 · answer #5 · answered by Whistler R 5 · 0⤊ 0⤋