Could The Whole World Use Just One Currency? part 2: Frictions

The video explores the evolution of trade from bartering to modern financial systems. It highlights the limitations of bartering, such as the difficulty in storing wealth and the lack of specialization. The introduction of currency, from gold to electronic systems, alleviated many trade frictions. However, international trade still faced challenges due to currency exchange risks. The introduction of the Euro simplified trade within Europe, reducing foreign exchange risks and promoting economic integration.

What was one major problem with bartering as a system of trade?

• It was difficult to find matching needs.

• It allowed for specialization.

• It was too easy to store wealth.

• It required a universally accepted medium.

What do economists refer to as 'frictions' in economic transactions?

• The benefits of bartering.

• The ease of using credit cards.

• The simplicity of electronic systems.

• Difficulties encountered during transactions.

Why might countries prefer self-sufficiency over international trade?

• To avoid foreign exchange risks.

• To increase global prosperity.

• To simplify currency exchange.

• To enhance industrial specialization.

What is a common method for businesses to manage foreign exchange risk?

• Using derivatives to buy insurance on Forex pricing.

• Avoiding international trade.

• Ignoring currency fluctuations.

• Relying solely on domestic suppliers.

What was a significant benefit of introducing the euro?

• It reduced labor mobility.

• It made international trade more complex.

• It facilitated easier business across European countries.

• It increased foreign exchange risks.

How did the euro impact labor mobility in Europe?

• It increased the percentage of Europeans working in different countries.

• It made working abroad more difficult.

• It reduced productivity.

• It decreased the talent pool for companies.

What was a challenge faced by European countries before the euro?

• High labor mobility.

• Significant risks dealing with foreign currency.

• Simple currency exchange.

• Easy collaboration on business deals.