How do currencies work? How do economists determine the value of a country’s currency? A physical piece of currency is just a piece of paper or a coin, but it represents an amount of purchasing power that can be used for goods and services. To evaluate a currency’s purchasing power, economists determine how many goods and services it can purchase from a hypothetical “basket of goods” that includes a broad range of things for sale in any given country. In this article, we’ll examine currencies and how the international market uses them to function.
Beginner Economics: How Do Currencies Work?
