The U. S. Macroeconomy State. | | | | | | | Good evening ladies and gentlemen: Today I will be speaking to you about international trade and foreign exchange rates.
Throughout history, there have been many market structures and systems, as well as trade amongst international countries and colonies. As all of you already know, imports can be brought in from many countries. During the process, the government will usually set a price ceiling and price floor for producers to protect them as a whole. For example, if there are farmers importing tomatoes from multiple countries into the United States, there will be a surplus. There is a surplus when the supply of the imported goods is greater than the demand.
As a result, a country export and import levels should be controlled by government policies. If there were no trade regulations applied to imports, the surplus may turns into deficit, negative affecting farmers who will lose money because of the decrease on the Gross Domestic Product. The Gross Domestic Product or GDP is the total amount of goods and prices a country produces in a one year span. International trade influences the GDP by expanding our markets with the imports of goods and services that are not available here to us.
Some of these goods and services are coffee, bananas, oil, and automobiles form Germany and Japan. The imports of these goods increase our economy GDP, but also allow us to export our own products and allow other countries to have the expansion we have. However, not everything is rose color. As a result of the economic expansion and diversity of goods and services provided by the international trade, prices are more competitive increasing the market competition among producers, which provide domestic consumers with cheaper products.
One of the major advantages of trading is that it allows producers to concentrate or specialize their work in the type of goods they produce best. When people decide to specialized in a specific profession an become doctors, farmers, teachers, or any other profession within an economy, they will be able to produce goods and offers different services that can be trade for any goods or services they may need. In this same way countries can become specialized in the production of specify products and/or services and trade those with other countries.
However, trading and importing products and services from other countries also has its disadvantages. As a result of the different products imported governments impose certain restrictions and limitations to protect the domestic production and market of every country involve in any kind of trading transactions. Governments have imposed taxes on trading transactions adding them to the cost of importation, and have the purpose of restricting and/or limiting the imports of goods and services into a country. These government impositions could be as a form of tariff or quota.
Tariffs have the purpose of protecting developing and advanced economies by restricting trade as they increase the prices of imported goods and services. Tariffs have not only the purpose of protecting economies but also domestic employment, retaliation, consumers, and national security. Without tariffs the domestic market competition will force producers to reduce cost by firing employees, and transferring their production to countries with cheaper labor. However, tariffs also have its negative effect on international trade.
The impose of tariffs make the cost of imports and exports more expensive, accumulating taxes to the total cost of this transaction. Many developing nations use tariff to restrict the imports of goods and services from other countries, if they believe it could be dangerous to the nation. In the same quotas limit the quantity of goods and services that foreign producers import to a country for a specify period. This is also a method of protecting employees, and domestic productions from the low prices of foreign products. Quotas can also affect consumers by increasing prices of foreign products, which will reduce the domestic market ompetition. As a consequence of the different trading transactions, trading countries are constantly buying and selling other countries currency. The foreign exchange market allows countries to trade their currency for such transactions, and it is the responsible of determing the value of each currency on a daily basis. The exchange rate is the he rate at which one currency will be exchanged for another. Currencies are usually in constant fluctuation as a result of the different activities of the foreign exchange market. Exchange rates between currencies are the result to the demand and supply of goods and services among countries.
Per example, U. S and China are usually trading different goods and services such as iron, clothing, toys, and many others things, as a result the two countries are often exchanging their currency China supplies the majority of the goods selling in the U. S. territory, and since it is the country that most produce importing goods; it is very difficult and unwise for a country to break relationship with it. If the U. S stops doing business with china, the supply /demand curve will be highly affected since the demand will be higher than the supply.
Unites states needs most of the products imported from china to keep its economy running. Taking in consideration that the U. S lack in the production of many important goods imported from china, and based on the fact that china held huge debts against this country, breaking economic relationship with china will be one of the worse decisions this country could do. We need the economy of our country to improve in production, and one of the ways is by keeping the relationship and trading with china and other international countries, but also protecting our own domestic economy. Thank you all for your time.