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International Trade & Finance Essay

891 words - 4 pages

International Trade and Finance Speech
The U.S. economy relies on many aspects in order to remain balanced and healthy. Two large aspects are foreign trade and foreign exchange rates. The entire economy can be thrown off if either of these has a dramatic sudden change.
When too much of a good is imported, it is considered a surplus. When too little is imported, it is considered a deficit (Colander, p. 581, 2010). In the event of a surplus of imports, the price would drop. Depending on how long there was a surplus of the good, it would affect the price of the good. An example of an import deficit, meaning we import more than we export, is seafood. In 2011, the U.S. imported $16.6 billion ...view middle of the document...

This would make getting a job after graduation much harder and make it difficult for students to pay back any student debt incurred.
In order to keep international trade in balance and to promote domestic production, the government enforces tariffs and quotas. Tariffs are taxes placed on imported goods (Colander, p. 458, 2010). This increases the price of the products and encourages the U.S. to produce and consume domestically. Quotas are limits to the amount of a certain good that can be imported. (Colander, p. 458, 2010). These both have the same goal, which is to reduce imports and encourage domestic production. These tariffs and quotas can have a negative effect on countries who export products to the U.S. If they cannot export the necessary products to the U.S. in order to turn a profit, their economy will start to weaken. They will start to focus on other countries who will allow larger import amounts, and they will no longer focus on the U.S (Colander, 2010).
Foreign exchange rates are the “rates at which one country’s currency can be traded for another country’s currency” (Colander, p. 107, 2010). These rates are decided by traders buying and selling different currencies. They take orders from banks who take orders from companies and individuals. It is based on demand which gives a value to each country’s currency (Colander, p. 486, 2010). Another way exchange rates are indirectly affected is the interest rate. When the interest rate is lowered, it lowers the exchange rate through the value of the dollar decreasing. This makes imports more expensive and exports less...

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