Answer to Question #59180 in Macroeconomics for Junior

Question

In which way does laundered money affect the current account and the capital accounts of the drug exporting or drug-importing nation? [think capital inflows and capital outflows] What is the impact on prices of other goods? Living standards? The value of the US dollar? Legitimate businesses?

5. What is Money?
A. What is value of Money?
B. Explain

Answer 1

Once the country is a drug-exporting, the inflow of laundered money increases its accounts, supports the value of local currency comparatively to US dollar, and improves living standards. However, most of the business is illegal.
Once the country is a drug-importing, the outflow of laundered money decreases its accounts, weakens the value of local currency comparatively to US dollar, and worsens living standards. An increase in drug-use decreases the social security in the country.
Money is a medium of exchange. It can be any item or verifiable record that is accepted as a payment for goods, services, repayment of debts.
The value of money is a utility delivered from every purchase of sum of money spent.