International Trade and Finance
International Trade and Finance
The United States imports goods and services, as well as exports goods and services in the global economy. International trade affects the United States’ Gross Domestic Product (GDP) and domestic markets. The government can affect international trade by imposing tariffs and quotas on imports. Foreign exchange rates affect how much is brought and sold abroad. International trade is beneficial to the United States, but sometimes it can be seen as unfair competition to the American workforce and businesses. In this paper I will put emphasis on international trade and foreign exchange rates and how those affect the GDP, domestic markets, and students. I will also outline some of the benefits on goods and services that are imported from other countries and how those contribute to United States’ economy in the United States.
A country has a trade surplus when exports exceed imports. This situation initially will create wealth for the country, but in the long-run the country’s currency appreciates causing the cost of its goods to other countries (exports) to become more expensive, which evens out the trade imbalance. After World War II the United States was in this situation, becoming an international lender to foreign countries (Colander, p. 449). This created wealth for the United States because of the flow of interest payments, instead of having to pay income on its own debt.
A trade deficit is when a country imports more than it exports. The United States is currently experiencing this type of trade imbalance. The U.S. is consuming more than it is producing, and they are financing this consumption by selling off assets such as stocks, bonds, real estate, and corporations (Colander, p. 448, 449). When goods and services are produced in the United States, it creates income and adds to the productivity of the nation. This increased productivity is included in the calculation of GDP. International trade is essentially when two or more
The United States imports goods and services, as well as exports goods and services in the global economy. International trade affects the United States’ Gross Domestic Product (GDP) and domestic markets. The government can affect international trade by imposing tariffs and quotas on imports. Foreign exchange rates affect how much is brought and sold abroad. International trade is beneficial to the United States, but sometimes it can be seen as unfair competition to the American workforce and businesses. In this paper I will put emphasis on international trade and foreign exchange rates and how those affect the GDP, domestic markets, and students. I will also outline some of the benefits on goods and services that are imported from other countries and how those contribute to United States’ economy in the United States.
A country has a trade surplus when exports exceed imports. This situation initially will create wealth for the country, but in the long-run the country’s currency appreciates causing the cost of its goods to other countries (exports) to become more expensive, which evens out the trade imbalance. After World War II the United States was in this situation, becoming an international lender to foreign countries (Colander, p. 449). This created wealth for the United States because of the flow of interest payments, instead of having to pay income on its own debt.
A trade deficit is when a country imports more than it exports. The United States is currently experiencing this type of trade imbalance. The U.S. is consuming more than it is producing, and they are financing this consumption by selling off assets such as stocks, bonds, real estate, and corporations (Colander, p. 448, 449). When goods and services are produced in the United States, it creates income and adds to the productivity of the nation. This increased productivity is included in the calculation of GDP. International trade is essentially when two or more
References: CBS NEWS. (n.d.). US Consumer Spending Up, but Income Lags. Retrieved from http://www.cbsnews.com/8301-500395_162-57406993/us-consumer-spending-up-but-income-lags/. Colander, D.C. (2010). Macroeconomics. (8th ed.). Boston, MA: McGraw-Hill/Irwin. Investopedia. (2012). The Basics of Tariffs and Trade Barriers. Retrieved from: http://www.investopedia.com/articles/economics/08/tariff-trade-barrier- basics.asp#axzz1um2yfox1. Trading Economics. (2012). United States Consumer Confidence. Retrieved from http://www.tradingeconomics.com/united-states/consumer-confidence. United States Department of Labor. (n.d.). Bureau of Labor Statistics. Retrieved from http://www.bls.gov/eag/eag.us.htm. World Savvy Monitor. (October 2008). International Trade Policy. Issue 5.