Foreign economic agents will accept a national currency for international transactions only if they are convinced that:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → the goods they can buy with a given amount of it will not change often
There is no single world currency and no world authority to force one. So foreigners accept a national currency only when its purchasing power is stable, that is, when a given amount of it keeps buying about the same goods.
NCERT (2026-27): “… When goods move across national borders, money must be used for the transactions. At the international level there is no single currency that is issued by a single bank. Foreign economic agents will accept a national currency only if they are convinced that the amount of goods they can buy with a certain amount of that currency will not change frequently. In other words, the currency will maintain a stable purchasing power. Without this confidence, a currency will not be used as an international medium of exchange and unit of account since there is no international authority with the power to force the use of a particular currency in international transactions.” |