International trade is essentially when two or more countries exchange goods and services. Many countries export their goods and services to other countries and in turn, they can also import goods and services from other countries to into their own. Advancements with technology have made it a lot easier for international trade to take place. Communication between countries is a good example. Communicating has vastly improved and helped to simplify the trading process. Some technologically advanced countries, like Japan and China have bountiful natural resources and that has a heavy impact on us. The United States is one of the largest contributors to international trade. Our GDP (Gross Domestic Product), is greatly impacted due to being huge import consumers. The United States relies heavily on products from other countries and we import much more than we export.
Not only does this impact our GDP by lowering it as we import more than export, is also has an impact on our domestic markets because we are buying more from other countries. In regard to Foreign Exchange Rates, it is very important to know how they are determined. Considering economic growth within a country is important, governments can make certain that fiscal and monetary policies are in place to ensure that growth continues. Due to the goods and services that are traded between different countries around the world, there are foreign exchange rate payments that are required to be paid. You will see the foreign exchange rate differ from country to country. What happens when there is a surplus of imports brought into the U.S.? Cite a specific example of a product with an import surplus and the impact that it has on the U.S. Businesses and Consumers involved.
First, it is important to try and keep imports and exports balanced. However, when one exceeds the other, it is called a surplus. Having a surplus of imports can create a lower price for the consumer, and have a positive effect on the employment rate of the country where the product was obtained. Seafood is a good example of a product with surplus. There are several states, mainly coastal states that have fishing boats out at sea for many months catching lobster, fish, crabs, etc. The seafood that is collected is used for both domestic sales and international export. This allows for several options when selecting fish, etc at the grocery store. It also increases your selection when out dining at a restaurant.
A downfall could be that a surplus of seafood, fish, etc could result in a declining need for domestic fisherman to work and this could cause layoffs and cutbacks. What are the effects of International Trade to GDP, Domestic markets and University Students? GDP stands for Gross Domestic Product and international trade. GDP is the market value of all final goods and services produced in an economy in a one year period. (Colander, 2010) International trade is the exchange of goods and services between two or more countries. International trade greatly affects the GDP due to the fact that is we are able to have goods produced outside of the United States and the imported for sale at a cheaper cost than if we were to produce here, the consumer demands will increase and therefore help the GDP.
Domestic markets are also affected by international trade as they have the ability to have products manufactured outside the United States at cheaper rates. This takes away from domestic manufactured product sales and could increase unemployment. On the reverse, it could affect domestic markets positively, as domestic retailers could mark up the products to consumers and keep the additional profit. International trade affects University students in a much different way. Suppose there was an increased demand for innovative ideas and qualified individuals to help keep our domestic markets alive? A University student could be a huge asset there. Also, the higher the GDP, more jobs will be available. If the GDP crashes, graduates should probably look for a job in another country.
How do Government choices in regards to tariffs and quotas affect international relations and trade? Both International relations and trade are greatly affected by government decisions that are made about tariffs and quotas. Tariffs are the most familiar and most commonly used type of trade restriction. Tariffs are most often recognized as taxes here in the United States. Quotas are quantity limits that are placed on imports. These limits are decided by the government.
The choices made by the government as it relates to additional fees for imports and limitations placed on the amount of imports directly affects international relations and trade. The positive side to this is that the government has the ability to control trade between themselves and other countries. This allows the United States to be picky. The ability to raise or lower tariff amounts gives us the power to possibly do business with underprivileged countries simply by lowering the tariffs as an incentive. They can also raise the tariff as a means to end relations with a country. What are foreign exchange rates? How are they determined?
In regard to Foreign Exchange Rates, it is very important to know how they are determined. Considering economic growth within a country is important, governments can make certain that fiscal and monetary policies are in place to ensure that growth continues. Due to the goods and services that are traded between different countries around the world, there are foreign exchange rate payments that are required to be paid. You will see the foreign exchange rate differ from country to country. Why doesn’t the U.S. simply restrict all goods coming in from China? Why can’t the U.S. just minimize the amounts of imports coming in from all other countries?
To put it simply, it is not possible for the U.S. to restrict all goods from China. This is mainly because there is an enormous trade deficit between us and China. China currently holds a very large portion of our nation’s debt and it would be a bad business decision to try and end relations when we still have a large debt owed to them. Not only do we have a large debt owed to China, the U.S. consumer has a very large demand for products that are made in China. China is one of the largest manufacturers of electronics and other luxury items, like the Iphone, Ipad, Ipod that we have come to rely upon. If we were to restrict all goods, we would not only destroy our economy, but also China’s economy.
Colander, D.C. (2010). Macroeconomics. (8th ed). Boston, MA: Mcgraw-Hill/Irwin Trading Economics. (2012) United States Consumer Confidence. Retrieved from http://www.tradingeconomics.com/united-states/consumer-confidence.