Questions: Why does the international monetary system exist? to control interest rates on international business loans to avoid monetary crises from becoming global because it sets the price of a given currency because most countries have their own currencies

The answer is: to avoid monetary crises from becoming global.

Explanation for each option:

1. To control interest rates on international business loans:

   • This is incorrect. While the international monetary system can influence interest rates indirectly through its impact on exchange rates and economic stability, its primary purpose is not to control interest rates on international business loans.

2. To avoid monetary crises from becoming global:

   • This is correct. The international monetary system exists to provide a framework for financial stability and to prevent monetary crises in one country from spreading to others. It aims to facilitate international trade, investment, and economic cooperation, thereby reducing the risk of global financial instability.

3. Because it sets the price of a given currency:

   • This is incorrect. The international monetary system does not set the price of a given currency directly. Currency prices are determined by the foreign exchange market, which is influenced by factors such as supply and demand, interest rates, and economic conditions. The international monetary system provides the rules and institutions that help manage these factors.

4. Because most countries have their own currencies:

   • This is partially correct but not the primary reason for the existence of the international monetary system. While it is true that most countries have their own currencies, the international monetary system exists to manage the interactions between these different currencies and to ensure smooth and stable international economic relations.

In summary, the international monetary system is crucial for maintaining global financial stability and preventing localized monetary crises from escalating into global issues.