Like why can’t some country say something like “our country’s currency value will be 200 times that of US dollars ” . And who determines this value or how it is determined. And why it constantly changes.
In: Economics
>Like why can’t some country say something like “our country’s currency value will be 200 times that of US dollars ” .
They can. But to what end? Let’s say you have some country whose unit of currency is the *foo*. Right now, 1 foo = 1 dollar. And let’s say that 1 foo/dollar can buy 1 apple.
This country wants its money to be 200 times the value of the dollar so it decides to come up with a new currency, the *bar*. 1 bar = 200 foo = 200 dollars. Everyone exchanges their foos for bars.
But what has changed? If I had 200 foos before, I now have 1 bar. But I’m just as “rich” as I was before. I can’t buy any more apples than I could have before. It’d be like if you went to your bank and exchanged 10 one dollar bills for 1 ten dollar bill. It doesn’t make you ten times richer, you’ve just swapped one currency for another.
>And who determines this value or how it is determined.
In a free market, the value of the currency is determined, more or less, by supply or demand. The value of an object in currency is determined by how much of that currency people are willing to give up in order to obtain that object.
Theoretically, a government could ban all export/import, forcibly set all prices and wages, but then you’ve completely removed yourself from world economics and your nation’s currency really wouldn’t have a comparison since it is completely isolated. Not to mention that such an economy would be doomed to fail.
>And why it constantly changes.
Because supply and demand changes, the cost of materials and labor changes, technology makes things cheaper but then produces more advanced more expensive products, natural and man-made events affect supply chains, hurt or promote businesses. The economy is a dynamic system that is always changing because people and the world is always changing.
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