11/9/2013

McDonaldsMoneyProblemsinArgentina

McDonaldsMoneyProblemsinArgentina
Background:
McDonaldcompanybeganin1940asabarbecuerestaurant operatedbyRichardandMauriceMcDonald FoundedinMay15,1940inSanBernardino,California; McDonald'sCorporationApril15,1955inDesPlaines,Illinois TodayMcDonaldhas33,000restaurants,across119countries andservingmorethan60millioncustomersperday Manyofthesearefranchises,whichhelpsthelocal entrepreneurtobuyandrunthestoresinlocalarea,which alsocatertomeetthetasteoflocalcustomers. BigMcandFrenchFriesaretwomostsuccessfulproduct

11/9/2013

McDonaldsMoneyProblemsinArgentina
Problems:
In2001McDonaldinArgentinasufferedalotdueto macroeconomicproblems TheproblemwaswithMONEY Household(H)andFirms(F)begantoloosefaithinPeso thinkingthatitwillloseitsvaluerapidly,buylessgoods andservices. PrecautionarymeasurebyHouseholdandFirms: Peoplestartedwithdrawingmoneyfrombanksand startedbuyinggoodsandservicesimmediately ExchangesPesowithUSDollar.

McDonaldsMoneyProblemsinArgentina
Problems:
GovtsStep Limit the amount of withdrawn form bank by $1,000 per account per month Results Further weaken the economy by reducing the funds of households and firms had available to spend. Banks become more cautious about making loans, which further reduces spending Result was lack of cash to pay Resulted in Argentinas Currency Crisis (19992002) Began in 1999 due to low GDP Heavy borrowing by Argentinas president Peso was fixed with US Dollar High Debt due to low tax revenue collections

11/9/2013

McDonaldsMoneyProblemsinArgentina
Problems:
During the currency crisis, one Argentine province decided to issue its own currency called , Patacone As Patacone was not officially recognized doubt spread about its acceptable widely But McDonald restaurant in that province started accepting the currency Patacone as a payment for its meal But eventually the currency crisis of Argentina passed and Mc Donald suffered a lot accepting Patacone because later people didnt accept it as a means of payment So confidence and trust in currency is vital and hall mark for the economy When confidence is lost then it can harm trade and economy

McDonaldsMoneyProblemsinArgentina
Question?
ExplainhowisExchangeratedetermined? Explainwhyacurrencylikedollarissovaluable todaythanlikeJapaneseYen. ExplainWhatmakepeoplemoreconfidentabout acceptingaparticularcurrency

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Thanks!!!