Eco 372 Week 5

919 WordsDec 16, 20124 Pages
International Trade and Finance Speech International Trade and Finance Speech The current state of the U.S. macro economy is made up of a plethora of highly involved processes. I am going to attempt to explain some simple terms and concepts focused on international trade and foreign exchange rates. Foreign Exchange Rates One needs to have a base level understanding of what defines an exchange rate. According to Investopedia, a foreign exchange rate is “The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.”(Investopedia, 2012) The process by which foreign exchange rates are determined is really not any different than any other…show more content…
A larger developed country will have numerous products it produces and exports. A surplus of imports, as one may imagine, can be disastrous. Surplus of Imports When a surplus of imports is brought into the US, American businesses can suffer due to increased foreign competition. A product in which there is an import surplus is oil. The Wall Street Journal in August 2011 predicted the US would experience an oil surplus. (Herron, J., 2011) Because the US had continued to import at the same levels and domestically produce at the same level, the U. S.has a surplus of oil stored. Since the article was published in late summer 2011, the US has experienced the surplus and has since decreased the amount of imported and domestically produced oil. One would expect that having a surplus of oil; consumers would benefit with lower prices of petroleum based products. As we all experience when we go to the gas pump; this is simply not the case. While this process has many more components to it, the base of it is that a surplus of an import can cause business and domestic consumers to suffer. I hope you have enjoyed this simple explanation of international trade and foreign exchange rates as it pertains to the current U.S. macro economy. References The Complete Idiot's Guide to Economics © 2003 by Tom Gorma Retrieved on February 27, 2012 Herron, J., Oil Surplus Seen if Recession
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