The issue of currency's credibility and ensuring stability in international transactions, is handled by............

International Monetary System.

The correct answer is Option (1) → International Monetary System.

In the past, governments have tried to gain confidence of potential users by announcing that the national currency will be freely convertible at a fixed price into another asset. Also, the issuing authority will have no control over the value of that asset into which the currency can be converted. This other asset most often has been gold, or other national currencies. There are two aspects of this commitment that has affected its credibility — the ability to convert freely in unlimited amounts and the price at which this conversion takes place. The international monetary system has been set up to handle these issues and ensure stability in international transactions.