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International Trade And Finance Essay

905 words - 4 pages

International Trade and Finance

ECO/372
July 30, 2012
Alexander Heil

International Trade and Finance
When the US has a surplus of imports it affects the companies in the US that make the same product. A study sponsored by the solar power industry has concluded that the United States ran a trade surplus of $1.88 billion in solar technologies in 2010, as exports of raw material and factory equipment for the solar sector outpaced imports of finished solar panels.
China has a rapid rise in solar panel manufactures, which now represent 58 percent of the world’s solar panel manufacturing. While American solar panel producers are struggling and filing for bankruptcy ...view middle of the document...

How much demand there is in relation to supply of a currency will determine that currency's value in relation to another currency. For example, if the demand for U.S. dollars by Europeans increases, the supply-demand relationship will cause an increase in price of the U.S. dollar in relation to the euro. There are countless geopolitical and economic announcements that affect the exchange rates between two countries, but a few of the most popular include: interest rate decisions, unemployment rates, inflation reports, gross domestic product numbers and manufacturing information (Investopedia.com (2012).
In the same way that supply and demand for products shift to change the prices of those products, the constant shifts in the supply and demand for foreign currency result in changing prices of currency. As a result, the “price” of money changes as demand for foreign currencies changes. This “price” of foreign currency, in terms of U.S. currency, is known as the foreign exchange rate. It simply tells you how many American dollars it will cost you to purchase a unit of foreign currency. This “floating” foreign exchange rate changes daily with the international supply and demand for currency.

If trade was restricted between the US and China it would set a precedent to restrict trade with other friendly countries. Would it be desirable to restrict trade on English muffins, Canadian maple syrup, or French wines also? Safety of imports to the US is a concern. It is never certain how these items are being made, are children forced to work, are the people being oppressed and forced to work (Helium.com (2008)?
But since 2000 when the U.S. government relaxed its monetary policy to fight recession, the U.S. has been on an especially long-running spending spree, leading to...

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