Please help me understand this defintion of the word 'Par'

Question

"the established value of the monetary unit of one country expressed in terms of the monetary unit of another country using the same metal as the standard of value."

I know it has someone to do with currency.... it hurts my head.

AlpheccaStars · Accepted Answer

Catmanx9xmonetary unit of one country

The monetary unit of a country is the name of its currency.

US - the dollar
European Union - the Euro
Switzerland = the Swiss Franc
India = Rupee
Japan = Yen
etc.

Metal of standard value = usually gold.

So suppose you have $1 (US) and use it to buy gold. How much gold would you have? Not much,about 0.05 grams of gold.
Suppose you took that 0.05 grams ($1 US) of gold and asked how many Euros would you get if you sold it?
It would be about 88 Euro cents, or 0.88 Euro.

So $1 US is 0.88 Euro. Gold is the standard for determining the value.
Similarly, $1 Euro is $1.13 US dollars.

The monetary value of a dollar (US monetary unit) is 0.88 Euro (European Union monetary unit) using gold as the standard of value.

Doctor D · Answer

This is a term that is not at all widely used. Par has to do with how much one country's currency is worth if it were exchanged for another currency. (Very few currencies are currently backed by gold or other precious metals, so that part should be ignored.) So one definition of "par value" is the official exchange rate between two currencies.

If the two currencies were "at par," you would exchange one for one (one British pound for one Euro, for example). Normally, however, one currency is worth more than another. A British pound is worth more than a US dollar, but a US dollar is worth more than a Canadian dollar. So you need to know what the exchange rate is.

Clear?

Please help me understand this defintion of the word 'Par'

Top answer

Get the Weekly English Kit 📬

Related Questions