Why do different currencies have different values, like why is the AUD different to the USD?

Question

Why do different currencies have different values, like why is the AUD different to the USD?

In: Economics

Answer 1

Currency is a representation of wealth to make trade easier. Wealth increase overtime in general and so you want to introduce more currency proportionally to the increased wealth of your country. So how much new currency do you introduce? Not all countries increase in wealth at the same rate and so the impact that your new currency will have on the economy will be different depending on the country.

In addition, do you really want to trust someone else to introduce the right amount of currency into the economy? Most countries want to keep control over that to make sure that someone else don’t make a big mistake and create economic problems.

So in the end the demand (wealth) and currency (supply) will be different in each country, which lead to different value.