Distinguish International Transactions From Domestic Transactions

3 Pages 625 Words

The main distinction between international transactions and domestic transactions are: the international transactions are the transactions, which take place between two different countries or the same company in two different countries. Whereas, Domestic transactions are the transactions, which take place between two different states inside the same country or transactions with in the same state. There are other number of factors, which distinguish international transactions from domestic transactions. 1) Each country has its own currency, and there is no such thing as universal currency. So if a company in one country has to perform business with a company in another country they have to convert the currency of the first country to that of the other country in order to buy or sell products from the second country. And this conversion of currency is performed by using the exchange rate, which entitles the price of one country’s currency with the currency of the other countries. For example, $1 Singapore dollar is equal to Rs27 Indian rupees. This conversion is necessary because all international transactions demand payments to be completed in domestic currencies. However, domestic transactions do not need this conversion process. International polices are not as easily transferable as domestic transactions because each country has its own monetary and fiscal policies. Each country regulates its monetary and fiscal policy depending on its necessity and its rate of inflation. So whenever, this rate of inflation alters there will be change in the exchange rate and those will in turn effect all the internal transactions. International Transactions are also too complex to perform because the relative inaction of the production factors, such as labor and capital. Therefore, it is very difficult to move labor from country to another and it is also hard to transfer money from one country to another. On the other hand domestic transaction...