Econ Islmbp

The general standard for measuring the overall size of the nation's economic activity is the value of gross domestic product (GDP). One of the components of GDP is a measure of the value of exports and imports of goods and services. The hitch is that GDP includes a large component of non-tradable that does not or cannot enter into international trade flows to any significant degree-for example, most buildings and structures, and personal and government services. Consequently, even though internationally traded items such as financial services and travel and transportation services are included in GDP, when we compare the size of the foreign sector with the size of the domestic economy, we end up comparing apples with apples and pomegranates. As a result, comparing exports or imports of goods and services to GDP may understate the importance of international trade to relevant sectors of the domestic economy

How much of the income in the United States is in the form of wages and fringe benefits?

Before we look at these forces, we should sketch out how exchange rate movements affect a nation 's trading relationships with other nations. A higher currency makes a country 's exports more expensive and imports cheaper in foreign markets; a lower currency makes a country 's exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country 's balance of trade, while a lower exchange rate would increase it.

In the Private Sector, there are many choices to be made by Business managers regarding which “projects” to borrow for and which “projects” to invest in.  These choices often contain a great deal of ______________________ as well as the potential for benefits (profits).

Currency exchange rates can be categorised as floating, in which case they constantly change based on a number of factors, or they can subsequently be fixed to another currency, where they still float, but they additionally move in conjunction with the currency to which they are pegged. Floating rates are a reflection of market movement, demonstrating the principles of both demand and supply, as well as limit imbalances in the international financial system. Fixed exchange rates are predominantly used by developing countries as they are preferred for their greater stability. They grant further control to central banks to set currency values, and are often used to evade market abuse. (MacEachern, A. 2008; Simmons, P.

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.

When an input (machinery, components, capital, labor, etc.) is denominated in a foreign currency, the risk exists that an unfavorable exchange rate movement will increase the cost of doing business. When the products are priced and sold in a foreign currency, an adverse exchange rate movement will make the product appear more expensive to consumers, decreasing demand or forcing the company to reduce its own profit margin to maintain lower price levels. For companies with integrated international business systems, an exchange rate shock can literally force them out of business, with their operations experiencing pressures from both cost and profit centers.

There can never be any country in the world which can survive on its own without being involved in international trade with other countries. Even the United States a super power can not have an economy which is growing or even raise the wages of our citizens unless we extend our trade beyond our borders and sell products and at the same time buy products from the rest of the population outside our country. We import a lot of goods from other countries. There are instances whereby there can be surplus in the goods that are imported in the United States. For instance the United States is a huge importer of automobiles. A surplus in the imported automobiles can have certain consequences on businesses as well as consumers. This will lead to a price drop of the automobiles. This is good news to the consumers as they will purchase them at lower prices. On the other hand this is bad news to the businesses since the price drop will make them incur a lot of losses.

7. Which of the following must be true if a firm is experiencing economies of scale?

Foreign demand for a primary product may also limit economic growth as demand for a particular commodity will cause an increase in demand for a country’s currency, thus resulting in the appreciation of the currency. This would reduce the competitiveness of the country’s manufactured exports, thus leading to a decrease in the financial resources gained from exports which could have enabled the country to raise the level of economic welfare to encourage development.

Consequences regarding the international businesses and the flow of trade and investment among the three countries are given below as benefits and drawbacks of holding fixed exchange rate system-

     International trade has been in existence throughout history and has an economic impact on the participating countries. Trade in most countries has a share of the Gross Domestic Product (GDP) and helps to boost the

International is referring to the business activities that are needed for the creation, shipping, and selling goods across foreign countries. The difference between the amount of money that is inputted into a country and the amount of it exported is called The Balance of Payments. In many cases the government will embark an embargo, which is the ban of imports or exports on specific goods. Tariffs are taxes that are put on certain imported products in which results in an increase in prices. Quotas are a limit on the quantity of goods that may be imported or exported within a given time period to regulate the international trade.

The balance of payments account indicates a systematic record of all export incomes and import payments of a country during any year. Any import from abroad has to be paid for. On the other hand, any export will bring money flow into the country. If we subtract the total value of the imported commodities from the total value of the exported commodities of a country, what we obtain is called the ‘Balance of Trade’ of the country. If the difference is positive, i.e. if the value of commodity exports exceeds the value of commodity imports, we say that the balance of trade is favourable. If the difference is negative, we say that the balance of trade is unfavourable.

International trade flows are the exchange of goods and services for money between different countries. It is referred to as sales which cross juridical borders. Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price levels rises, each unit of currency buys fewer goods and services. Exchange rates between two currencies specify how