International Trade Simulation and Report

1417 WordsFeb 12, 20116 Pages
International Trade Simulation and Report International trade is the exchange of goods, capital, and services across international borders or territories. In most countries this trade represents a significant share of their (GDP) gross domestic product. This type of trade has political, economic, and social importance to all nations involved. There are many factors surrounding international trade, such as, advantages, limitations, foreign exchange rates, and others. As we review these factors, this will allow us to better understand how international trade truly functions. Advantages and Limitations International trade is based on having a comparative advantage. Countries produce products that are easier for them to produce, then…show more content…
11). This is true but with governments like China sometimes we need to have trade restrictions in order to limit their advantages. Absolute and Comparative Advantage International trade is important to nearly all economies around the world. Most economies are open, which means interactions in trade and finance with other countries. Trade is buying and selling products or services. If an individual or country has an absolute advantage over another, this is the ability to produce more of a good or service using the same number of resources available. If an individual or country has a comparative advantage over another, this is the ability to produce a good or service at a lower cost than others. Possessing a comparative advantage in trade is very important because, an individual or country can produce a product or service and make more money on that item or service. The individual or country can than import other items the individual or country does not have or does not make as much profit on. Maximizing profits is most important for an individual or country, and trading to obtain other items is good business. Foreign Exchange Rates The foreign exchange rates are influenced by supply and demand of currency. When companies purchase services and products from other countries, they need to convert their money into the currency from the country they bought the product or service from. The value of the money is the exchange rate. When there is a demand

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