In
this modernization era, peoples make their own investment instead of just
saving money in the financial institution. Currently, the most popular
investment is FOREX. Forex is the foreign exchange market or currency market.
It is one of the largest markets in the world.
Wonder
that you have ever traveled to another country, you usually had to exchange
your money into the currency of the country you are visiting. When you do this,
you have essentially participated in the Forex market. However, a large part of
the market is made up of currency traders, who speculate on movements in
exchange rates. They earn the money through the fluctuations in exchange rates.
There
is no “inside information” in the foreign exchange market. Significant news is released publicly so
everyone in the world receives the same news at the same time.
The
foreign exchange market operates 24 hours per day throughout the week between
individuals with Forex brokers, brokers with
banks, and banks with banks. According to research, the average daily
international foreign exchange trading volume is $5.0 trillion.
The
graph below shows the average daily trading volume in the Forex market, New
York Stock Exchange, Tokyo Stock Exchange and London Stock Exchange.
The
currency market is over 200 times bigger! This shows that Forex is becoming
more and more popular among us. Now, not only banks are investing in Forex;
households with high income also invest their money in Forex because they
believe that it is profitable sometimes. This act of investment is called a
leakage from the circular flow model. This is because the money is not spent on goods and services
produced by firms. In this way, they will tend to consume
more and the money flows back to the circular flow. This proves that the total
income (Y) of our country is equal to the total consumption (C) we made.
Reference:
By Lee Jie Shi 0315696
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