In International Economic Exchange there is one crucial element: How do buyers

and sellers in different countries do business when they all use different currencies? As we
know, money is anything that is accepted as a medium of exchange. In most of the world
But in each nation, they accept different pieces of paper. This means that if someone in the
United States wants to buy something from someone in, say, Philippines, she must first
exchange her local currencydollarsfor the currency accepted in Philippinespesos.
This currency conversion occurs at an exchange rate. A currencys exchange rate is
determined by the interaction between the supply of and the demand for currencies in the
foreign exchange marketthe market in which the worlds currencies are traded.
Returning to our example of the United States and Philippines, the price of the peso in
dollarsthe dollar-peso exchange rateis determined by U.S. demand for Philippine
goods and Philippine demand for U.S. goods. However, when the exchange rate changes,
that affects the price of each country's goods. That price change affects each country's
demand for the other's goods in ways that tend to reverse the initial trend.
The rules and procedures for exchanging national currencies are collectively known
as the international monetary system, it consists of interlocking rules and procedures and
is subject to the foreign exchange market, and therefore to the judgments of currency
traders about a currency.
The WTO works to help international trade flow smoothly, predictably, and freely,
and provides countries with a constructive and fair outlet for dealing with disputes over
trade issues.
The work of the IMS and the WTO is complementary. A sound international financial
system is needed to support vibrant international trade, while smoothly flowing trade
helps reduce the risk of payments imbalances and financial crisis. Both work together to
ensure a strong system of international trade and payments that is open to all countries.
Such a system is critical for enabling economic growth, raising living standards, and
reducing poverty around the globe.






MIDTERM REQUIREMENT
IN INTERNATIONAL
POLITICAL ECONOMY




PREPARED BY:
RENATO ANTALAN JR.
JUSTINE BILLE DADEZ
JENNY-VI DE DIOS
WILLIAM VILLEGAS