This work describes the relationship between international trade and world output. The relationship between supply and demand, world output and international trade are discussed and examples are provided for specific countries such as the United States and Canada.
International Business –
International trade is the purchase, sale or exchange of goods and services across national borders. (Griffin, Pustay, 2010) International trade is important not only for the country exporting the goods by means of revenue for the exporting country but also for the importing country by means of bringing in goods that country may not have readily accessible. This trade relationship between countries not only provides a greater choice of goods for consumers but also provides for job creation in many countries as well.
1. Explain the relation between international trade and world output. (Give an example also).
The quantity of world output in a given year will affect the international trade for that year. The slower a countries economic output the slower the volume of international trade as well. The same rings true for the reverse, the higher the output from a country the greater the international trade.
Trade decreases and increases with the world’s economy; in times of recession trade will decrease due to a decrease in consumer spending most closely related to economic uncertainty. Trade will increase as the recession ends and consumer spending and confidence grows.
Exchange rates also affect international trade, as countries currency weaken to trading countries it becomes more costly to do business with that country. This also affects the costs of importing goods from other countries and can make those imports more costly to that country than the domestic products already found within its borders.
Economists believe that the balance of trade is governed by a countries wage rates, tariffs, as well as national savings and...