(GS804)Reflection on money, interest rates and exchange rates

Name:Tai ZhengWen Student number:22-618685

Money, interest rates, and exchange rates are key concepts in international
finance and macroeconomics, playing a crucial role in shaping international financial
markets and macroeconomic policies. In the process of studying this course, I have
gained a deeper understanding of these concepts and realized their close connections
as well as their impact on the world economy.
Firstly, money is the blood of the economy, flowing throughout the entire
economic system, supporting transactions and investments. In this course, I learned
about the monetary systems of different countries, including fixed exchange rate
systems and floating exchange rate systems, as well as their advantages and
disadvantages. The relationship between money supply and demand has a profound
impact on inflation and the formulation of monetary policy. Understanding the
essence of money and how it affects both domestic and international economies has
helped me better understand the goals of monetary policy, such as stabilizing price
levels and promoting economic growth.
Secondly, interest rates are a key factor in the money market, which directly
affects investment, savings, and money supply. In the course, I learned how the
central bank controls the money supply by adjusting interest rates to achieve
economic policy goals. High interest rates can attract foreign capital inflows, but they
may also lead to an increase in domestic borrowing costs, thereby suppressing
investment. Understanding this trade-off and the role of central banks has given me a
better understanding of the formulation and implementation of monetary policy.
Finally, exchange rate is a core factor in the international financial market, which
determines the relative prices of different national currencies. In this course, I learned
about different types of exchange rate systems, including fixed and floating exchange
rates, as well as their impact on international trade and capital flows. Understanding
how exchange rates are influenced by economic factors and market expectations, as
well as how governments intervene in foreign exchange markets, is crucial for
understanding international trade and financial markets.
Through the study of this course, I not only gained a deeper understanding of
money, interest rates, and exchange rates, but also realized the complex interactive
relationships between them and how they collectively affect international financial
markets and macroeconomic policies. In addition, I also understood the importance of
international cooperation and policy coordination, and gained a clearer understanding
of the operation of the world economy.