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ECO/372
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International Trade and Finance Speech
The United States’ macro economy is a complex system made up of a vast variety of highly involved processes. The following information will provide a clear and concise explanation of terms and concepts wit focus on international trade as well as foreign exchange rates.
Foreign Exchange Rates In order to understand why the foreign exchange rate is important to the economy, it is important to have a basic knowledge of what the foreign exchange rate consists of. The foreign exchange rate is described as the price of one country 's currency expressed in another country 's currency (Colander, 2010). This definition is important …show more content…
Choosing the appropriate tariffs or quotas is a delicate balancing act because the country is imposing the tariffs and/or quotas as a means to protect the domestic business sector. An example of this is, if the United States produces a technology and the same technology is imported from foreign soil at a cheaper rate, a tariff or quota would be introduced to ensure the cost of the foreign technology is up to the cost of the domestically produced technology. These tariffs and quotas are important because in the event that the scales become unbalance, international relations as well as trade are strained. When international relations and trade become strained, the foreign trade partner will initiate its own counterbalancing tariffs and quotas. For this vary reason the United States will not restrict all goods coming in from China as this move would initiate a trade war. This attack on each countries’ trade is accomplished by imposing high tariffs or quota restrictions. It is unfeasible for the United States to minimize imports coming in from all countries because of the various trade agreements the United States shares with these country’s varies. For example, a small developing country could only have one or two products it produces and trades; while a larger more developed country will have an abundance of products it …show more content…
Oil is a prime example of a product that America imports in surplus. In August of 2011 The Wall Street Journal accurately predicted the United States would experience an oil surplus (Herron, J., 2011). This prediction was accurate because the United States continued to import at the same levels it domestically produced. Because The United States has experienced this surplus it has since began to decrease the amounts of both imported and domestically produced oil. It is easy to assume that since America has a surplus in oil consumers would reap the benefits of lower prices. Unfortunately every time that an individual fills up a vehicle at the gas station they are reminded that this is not an accurate assumption. While the cost of fuel is more complex than the above description the underlining point is that a surplus of an import can cause American businesses and domestic consumers to suffer