How does currency affect trade?

Answer 1

Most importantly, trading allows specialization. If every person in the world had to be self-sufficient, world-wide efficiency would suffer greatly. Some people, indeed, some regions are better suited for agriculture, or industry, or extractive mining. Trading allows people, firms, or regions to specialize in the production of something for which they have a comparative advantage, and trade with others for things they can't produce.

Answer 2

When you say currency, I am assuming you mean money. Money is important because it is a means of exchange for goods that might not be easily exchangable. For example, how many beers equal the value of a pool? It is a way of making things less implicit by applying a value to a good or service that one can exchange money for. This makes money a unit of account. That is economics talk for a number and, in the United States, a dollar sign to understand what something is worth explicitly. It also makes accounting easier because if you can turn your assets and liabilities into terms of money, you can extract meaningful data from that information. Money is also a store of value. A store of value means that money keeps its value in a sense that a car loses its value over time. This means that, assuming there is no inflation on the currency, there is no loss of value from today into 100 years from now.

If you want to know why different places have different currencies and why we (as in Earthlings) do not have a single currency is because A) nationalism exists. B) it allows for economies to compete. There are much more complicated reasons and answers to this but I assume you do not need to know this for a Master's thesis.

Answer 3

Currency is important to trading because that is how countries make their profits on imports and exports. Countries such as China, India, Japan which heavily engage in import/export with the US keep a close eye on their currency valuation.