International Trade and Finance Speech - Research Paper Example

macro economy. 1. What happens when there is a surplus of imports brought into the U.S.? Cite a specific example of a product with an import surplus, and the impact that has on the U.S. businesses and consumers involved. There are two common things that happened when there are surplus imports in the US economy namely: The domestic producers tend to experience low sales volume and lower incomes (Sherman & Hunt, 2008). This is because imported goods tend to be sold at lower price in the domestic market than locally manufactured goods (Sherman & Hunt, 2008).

On the other hand, locals consumers tend to enjoy low prices charges as imported goods are sold at reduced prices relative to locally manufactured products (Sherman & Hunt, 2008). In above connection, when imports are higher than exports then an economy is said to be experiencing unfavorable balance of trade (Lasher, 2010). Examples of products that have a surplus import include: oil product, clothes and electronic items (Sherman & Hunt, 2008). It was reported that the US economy imported several barrels of petroleum oil and gases from countries like; China Iraq, Japan to name just but a few.

This has made the prices of oil to escalate causing suffrage to the locals (Sherman & Hunt, 2008). . For example in 2007, exports were 12% while imports were 16% this led to a decrease in GDP growth rate (Economy Watch, 2010). Therefore, International trade affects domestic markets into two major ways namely; it help to broaden domestic market as more business venture are being established (Economy Watch, 2010).Secondly, it has led to closure of local markets because they sell their products cheaply than domestic markets (Van & Lewer, 2007).

University students like me have been adversely affected by international trade in the sense that there has been a lot of cultural and technological exchange with the foreign students. This has led to positive trade balance (Van & Lewer, 2007). 3· How do government choices in regards to tariffs and quotas affect international relations and trade? The application of tariffs and quotas involves placing trade restrictions to the foreign countries on the quantity of imports (Lake & Powell, 1999).

Normally, tariffs’ and quotas are employed by countries in attempt to protect domestic industries, consumers and infant industries (Lake & Powell, 1999). This means that application of quotas and tariffs creates trade barriers between the countries, and therefore, preventing free and fair trade among countries (Lake & Powell, 1999). This may further affect international relationship by creating enemity as trading countries retaliate against each other by placing the same barriers in return (Lake & Powell, 1999).

4· what are foreign exchange rates? How are they determined? Exchange rates refer to the rate at which local currencies are exchanges with foreign countries (Rosenberg, 2003). The rates may determined by the market forces commonly known as; demand and supply market forces. Whereby, when there is