International Economics and U.s. Exports

1794 Words Dec 30th, 2010 8 Pages
Chapter 2

International Flow of Funds

Lecture Outline

Balance of Payments

Current Account Capital and Financial Accounts

International Trade Flows

Distribution of U.S. Exports and Imports

U.S. Balance of Trade Trend

International Trade Issues

Events That Increase International Trade

Trade Friction

Factors Affecting International Trade Flows

Impact of Inflation Impact of National Income Impact of Government Policies Impact of Exchange Rates Interaction of Factors

Correcting a Balance of Trade Deficit

Why a Weak Home Currency is not a Perfect Solution

International Capital Flows

Distribution of DFI by U.S. Firms

Distribution of DFI in the U.S.

Factors
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importers would have more seriously considered purchasing their goods in the U.S. if most or all currencies simultaneously strengthened against the dollar. Conversely, if some currencies weaken against the dollar, the U.S. importers may have simply shifted their importing from one foreign country to another.

6. Demand for Exports. A relatively small U.S. balance of trade deficit is commonly attributed to a strong demand for U.S. exports. What do you think is the underlying reason for the strong demand for U.S. exports?

ANSWER: The strong demand for U.S. exports is commonly attributed to strong foreign economies or to a weak dollar.

7. Impact on International Trade. Why do you think international trade volume has increased over time? In general, how are inefficient firms affected by the reduction in trade restrictions among countries and the continuous increase in international trade?

ANSWER. International trade volume has increased because of the reduction in trade restrictions over time. It may have also increased for many other reasons, such as increased information flow (via Internet etc.) between firms in different countries. Inefficient firms are adversely affected if they have to face tougher competition from foreign firms as a result of a reduction in trade restrictions.

8. Effects of the Euro. Explain how the existence of the euro may affect U.S. international trade.

ANSWER: The euro allowed for a single currency among many
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