Telling a ten -year -old child w

All the countreis in the world need transactions with each other. But the money of most countries are not the same. So you can not use your money in exchange for the goods you need directly in international market. You need to change your money into the money of that used by the country who trades with you in order to get your goods paid. However, it makes your currency outflow into the international market leading to the fluctuationchange of foreignh exchange rate. You can imagine consider it as that every kind of money takes relative share in the whole world’s market and if a large amount of one currency appears, making it takes a higher rate of what it deserves, in the market. It will become depreciated which. It represents the purechasing power of that kind of currency decreased. To prevent the change of the currency, a country need to buy their money back to maintan the exchange rate.But it is not easy to directly ask the autorities for help especially the recipent need to afford a high interest. So a country needs to reseve some currencies which have been widely used and recognised in case that they need to buy their money back.

Here is the question.As the money differs in different countries, their need to be a specific currency method to take the rolesolve the problem of balancing such international payment between them. And the IMF, an organizition working on the area is founded. And it came up with the method called Special Drawing Rights, also SDRs, which is a basket of freebly usable currencies containing US dollar, Euro, Japenese yern, pound sterling, and RMB.(The composition is being reviewed evey 5 years.) Every member of the IMF have a definite share of SDRS in accordance with their weight position they play in the international trade, and the reserve assets they have can be changed into different currencies in the basket to trade within the shares they have and no interests needed.

So, you can easily take it as a vitual currency, it is not real money nor something existing. Just an accountin